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Prior to the introduction of single touch payroll, the ATO only received limited information about employees’ wages, usually when group certificates were lodged at year end. This information delay made the detection of underreported and unpaid PAYG tax and superannuation difficult.
The expanded use of data is now resulting in greater and earlier identification of any underpayments and underreporting.
We are noticing a larger number of directors being pursued for unpaid superannuation guarantee charge obligations than when the director penalty regime scheme for superannuation was first introduced. We are also noticing that the ATO are now detecting unpaid and unreported obligations a lot earlier than a decade ago and pursing those obligations more vigorously.
This in some part appears to be attributable to greater reporting obligations and better data matching.
ATO Pilot Program
The ATO have already announced that it would be conducting a small nudge letter pilot, contacting a limited number of employers by letter. These employers appear to have outstanding SG obligations according to STP and with no fund data reported to the ATO.
Single Touch Payroll – a game changer
The ATO now receive up to date information each payment cycle. STP phase 2 reporting has resulted in even greater transparency in this regard. The ATO has also been expanding its use of single touch payroll data with the view of achieving greater compliance.
With the growth of automation and data matching, this is now presenting ever expanding opportunities for the ATO to detect any potential underpayment of PAYG and SGC. This expanded use of data has been a key focus area for the ATO for several years.
Director Risks and Superannuation
One of the biggest risks for business owners is around superannuation reporting and payment.
In circumstances where superannuation is unpaid and not reported as superannuation guarantee charge within one month of its due date, the director becomes personally liable for this debt.
The ATO will pursue these debts from Directors even if the Company is liquidated, there is no release from these obligations.
Superannuation Paid Late to a Superannuation Fund and Not Reported as SGC
In circumstances where superannuation is paid to the superannuation fund AFTER the due date and SGC statements are not lodged, the superannuation contributions will continue to incur nominal interest on the shortfall amount.
The nominal interest will continue to incur from the beginning of the relevant quarter until:
- the employer lodges an SG statement; or
- the Commissioner makes a default assessment.
This can result in significant nominal interest accruing until an assessment is made, even though payment of the superannuation debt may have been made only a few days after the due date.
This represents a significant risk for Directors where SGC statements have not been lodged. With the expanded use of data, it is now more likely that any late payments will be detected, and the nominal interest quantified, albeit many months after the payment date.
What Should Business Owners and Accountants Do?
Business owners should ensure that superannuation is always paid on time.
Where this is not possible, it is imperative that superannuation guarantee charge statements are lodged. Paying a few days late to the super fund without reporting is not an option. Non-lodgement of SGC statements will result in the nominal interest continuing to accrue until the SGC is reported either by the Director or otherwise quantified by the ATO.
While the ATO’s focus is firstly on achieving greater compliance, where compliance is not met, the focus will shift towards collection.
The Future of Superannuation Payment Obligations
The Government have announced that from 1 July 2026, employers will be required to pay their employees’ superannuation on payday. How this obligation will interact with the SGC scheme and the director personal liability scheme remains to be seen. One thing is for sure, SGC and greater data matching will continue to remain a focus area for the ATO.
If you have a client facing financial difficulties and needs to turn things around, contact us today to set up a meeting. We’re experts in financial restructuring and in the other turnaround strategies needed to get a business back on track.