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Understanding the Superannuation Guarantee Charge (SGC)

· 4 min read
Myaccountant Team

In the 2021-22 financial year, the ATO collected over $1 billion through its superannuation compliance activities. A significant portion of that figure came from the Superannuation Guarantee Charge — the penalty regime that applies when employers fail to pay super fully or on time. Understanding how the SGC works is essential for every Australian employer.

When the SGC Applies​

The Superannuation Guarantee Charge applies whenever an employer does not pay the correct amount of superannuation guarantee (SG) for an eligible employee by the relevant due date. Under the current quarterly system, SG is due 28 days after the end of each quarter. If the full amount has not reached the employee's super fund by that date, the SGC is triggered.

It is important to note that the SGC is calculated on the employee's total salary and wages — not just the ordinary time earnings base used for standard SG calculations. This means the SGC amount will often be higher than the original super obligation.

How the SGC Is Calculated​

The SGC has three components:

  1. SG shortfall amount. The difference between what should have been paid and what was actually received by the employee's super fund, calculated on total salary and wages (not ordinary time earnings).
  2. Nominal interest. Charged at 10 per cent per annum, compounded daily, from the start of the quarter in which the shortfall arose until the date the SGC is paid. This component is designed to compensate employees for lost investment returns.
  3. Administration fee. A flat $20 per employee per quarter in which a shortfall exists.

A Practical Example​

Consider an employer who fails to pay $550 in super for one employee in a quarter. The SGC calculation would include the $550 shortfall amount, nominal interest at 10 per cent per annum compounded daily from the start of the quarter, and the $20 administration fee. Over a typical assessment period, this could produce a total SGC of approximately $583.70 — more than the original obligation.

For employers with multiple employees or multiple quarters of shortfalls, the amounts escalate quickly.

Lodgement Deadlines​

Employers who have an SGC liability must lodge a Superannuation Guarantee Charge Statement with the ATO. The deadline is one month after the SG due date — that is, two months after the end of the relevant quarter.

For example, SG for the October-December quarter is due by 28 January. The SGC statement for any shortfall in that quarter must be lodged by 28 February.

Failure to lodge the SGC statement on time can result in additional penalties.

Consequences of Non-Compliance​

The SGC itself is only the starting point. Employers who fail to meet their super obligations face a cascade of consequences:

  • Continuing interest. Nominal interest accrues daily until the SGC is paid in full. The longer the delay, the larger the liability.
  • Administration fees. The $20 per employee per quarter fee applies to every affected employee in every affected quarter.
  • Part 7 penalties. The ATO can impose additional penalties of up to 200 per cent of the SGC amount for late lodgement, failure to provide information, or reckless or intentional disregard of the law.
  • Director penalties. Under the director penalty regime, company directors can become personally liable for unpaid SGC amounts.
  • Legal action. In serious cases, the ATO may pursue criminal prosecution for deliberate non-payment of super.

The SGC Is Not Tax Deductible​

Unlike ordinary SG contributions, the SGC is not a tax-deductible expense. The shortfall component, the interest, the administration fee, and any penalties are all non-deductible. This makes the true cost of non-compliance significantly higher than it first appears.

Avoiding the SGC​

The simplest way to avoid the SGC is to pay the correct amount of super for every employee by the due date. Employers should reconcile super payments each quarter, use payroll software that calculates SG automatically, and set calendar reminders for payment deadlines. Prevention is always cheaper than remediation.