June 2, 2022

Small Business Super Guarantee – what you need to know before the EOFY

With so much on your mind at any point in time, it’s easy for super contributions to fall to the bottom of any small business owners to-do list. Let us help you stay on top of your small business Super Guarantee this financial year by breaking down the recent changes and common pitfalls:

Late Payments

As a small business owner, it is however your responsibility to pay the Super Guarantee for your staff, and ensure that you pay it on time. A failure to pay it on time will mean that you are no longer able to receive a tax deduction for the payment for that financial year, and you can face hefty penalties!

No small business owner wants to be five days late on a $10,000 super payment – you’ll lose the tax deduction on that payment AND potentially cop a $20,000 penalty as well. So, how can we make sure this never happens to you? Make sure that your super is paid well before the time it is due. This should be a priority payment(a payment that you make before anything else).

Tax Deductions

As the end of the financial year approaches, it’s time to think about your June Super Guarantee payments. You may have until 28 July to make the payment, but leaving it until then will not net you a tax deduction until the next financial year. From a tax perspective, this may not be what you want to do (unless you know that in the next year, you will need more tax deductions).

Superannuation also has a few strange rules when it comes to claiming a tax deduction.  For employee superannuation, it is critical that it is paid on time. More than that, the money has to actually be in the bank account of the super fund for you to claim a tax deduction. Unlike other expenses where you can show the money coming out of your bank account, this money needs to be present in your super fund for you to make the claim. If your Super Guarantee payment hits the bank account of the super fund on 30 June then you can claim a tax deduction for that year. If, however, it hits the bank account on 1 July then the tax deduction is claimed in the financial year after.

Superannuation Clearing House

Problems arise when you are paying your super through a clearing house, as the transaction takes a number of days to clear and for the payment to land in the super fund. For example, you may pay the clearing house on 25 June, but your super fund may not receive it until the 1 July. The ATO’s Small Business Superannuation Clearing House usually has some concessions in these instances.

If you want to get a tax deduction for your June Super Guarantee payment, you need to work out with your clearing house the latest day to which they can guarantee the super fund will then receive the payment this financial year. Some of these clearing houses are currently quoting that you should be paying as early as the 14 June.

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Rate Increase

The last thing to note regarding your small business Super Guarantee is that the rate will increase to 10.5% from 1 July. This rate change applies to wages paid on or after 1 July, so make sure your payroll system either automatically updates the rate or that you have updated it to reflect the increase.

In conclusion

Paying super is an important part of being a small business owner, especially when employers who fail to meet their Super Guarantee obligations can be liable for a range of penalties or charges on top of the Super Guarantee charge. To ensure your business remains compliant, remember to:

  • Pay the right amount (9.5 per cent) of employee ordinary time earnings until 1 July 2022 (when it will rise to 10.5)
  • Pay on-time
  • Pay the right way and
  • Keep records to show you have met your obligations

When you partner with us for the long term to provide customised tax and business advice, we’ll ensure you stay on top of your tax compliance responsibilities—and on the right side of the ATO.

We’ll work with you to ensure your statements and tax obligations are completed on time, and provide you with comprehensive tax advice and support to help you gain a better understanding of your finances and improve how your business operates. With Seriously Good Accounting, there’s nothing holding your business back – you’re free to grow. Get in touch with our team of experts today!

Filed Under: Business Advisory, Compliance, Small Business Tax

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