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Home / How super works / Employers guide to super / Are you meeting your employer super obligations: What are the penalties?

Are you meeting your employer super obligations: What are the penalties?

November 13, 2020 by Janine Mace Leave a Comment

Reading time: 3 minutes

On this page

  • Meeting your SG obligations
  • Choice liability: Your obligation to offer choice of super fund
  • What other penalties I could face?
  • Hitting your pocket: Directors are responsible too
  • Applying penalties: When the ATO acts

As an employer you have lots of responsibilities and a business to keep on track, so reporting and paying super contributions for your employees can seem like something to put off until another day.

But it’s important to remember that if you don’t meet your Superannuation Guarantee (SG) obligations you are breaking the law.

Although there are penalties for not reporting and paying on time, if you continue to avoid your responsibilities the ATO has the power to impose additional penalties on both your business and your personal wallet.

Meeting your SG obligations

When you have employees, you must make SG payments on behalf of your eligible employers at least quarterly.

Employers that don’t do the right thing – or who fail to lodge the necessary paperwork – by the quarterly deadlines are required to pay a Super Guarantee Charge (SGC) and lodge an SGC Statement.

The SGC has three components:


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  1. SG shortfall amount (including any choice liability), which is when you do not pay the full SG contribution for your employee.
  2. Interest on this amount,with thecurrent interest rate being 10%.
  3. Administration fee of $20 per employee, per quarter.

For more information, read SuperGuide article Super Guarantee Charge for employers: What is it and what are my options?


Need to know

If you are liable to pay the SGC, your liability is calculated based on your employee’s full salary and wage amount, not their Ordinary Time Earnings (OTE) amount that is normally used.

This means your SGC will be higher than the SG amount you normally would have paid if you made the quarterly contribution on time. You are also not permitted to claim a tax deduction for your SGC payment.

If you don’t lodge your SGC Statement and pay the SGC by the due date, further penalties may apply.


If an employee reports you for unpaid super, the ATO will start an investigation on their behalf and you may incur significant penalties for non-compliance. These penalties will be on top of the normal SGC Charge.


Need to know

If an employee reports you to the ATO for non-payment of their SG contributions, there are whistleblower provisions in place to protect them.

From 1 July 2019, it is an offence to victimise an individual or employee you know or suspect of having advised the ATO of non-payment of super contributions.


Choice liability: Your obligation to offer choice of super fund

If you don’t give your eligible employees the choice of super fund into which you pay their SG contributions, you may incur a choice liability.

A choice liability ispart of the SGC and you will be accountable if you:

  • Haven’t provided your eligible employees with a Standard Choice Form within the required timeframe
  • Paid super contributions into a complying super fund that is not the fund chosen by an employee (which is called a no choice contribution)
  • Charged employees a fee for implementing their choice of fund.

Need to know

Where you provide your employees with a Standard Choice Form and they do not select their super fund quickly, forcing you to pay their SG payments into your default employer super fund, you will not incur a choice liability.


The choice liability is 25% of the notional quarterly shortfall (9.5% of the employee’s total salary and wages up to the maximum contribution base), less any individual SG shortfall for the employee for that quarter. This is limited to $500 per notice period for each employee.

For more information, read SuperGuide What is the maximum super contribution base for 2020/21?

What other penalties I could face?

1. Part 7 Penalty

If you lodge your SGC statement late, or you fail to provide a statement or information when requested during an audit, the ATO will impose a Part 7 Penalty. This can be up to 200% of the SGC that is payable.

2. General interest charge (GIC)

If your SGC is not paid by the due date, you will need to pay the GIC, which accrues from the SGC due to the date the debt is paid in full. The GIC is calculated on a daily compounding basis but is tax deductible in the year it’s incurred.

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3. Administrative penalty

If you make a false or misleading statement to pay less SGC than you should, the ATO may impose an administrative penalty. The base penalty can be up to 75% of the shortfall amount, but the actual penalty amount will depend on your particular circumstances.

4. Failing to keep adequate records

If you fail to maintain SG records, the maximum fine is 30 penalty units ($222 per penalty unit in 2020/21). You may also be liable for an administrative penalty of 20 penalty units.

5. Failing to pass on a TFN

If you don’t pass on an eligible employee’s Tax File Number to their super fund or RSA within the required timeframe, the penalty is 10 penalty units each time this occurs.

6. Entering an arrangement to avoid your SG obligations

If you enter into an arrangement designed to avoid your SGC liability, you will be liable for the SGC amount you avoided plus a penalty. The base penalty can be varied according to the particular circumstances.

Hitting your pocket: Directors are responsible too

If you are a director of a company that fails to meet its SGC liabilities in full by the due date, that liability automatically becomes a personal liability for you. The personal liability is a penalty equal to the unpaid amount.

While the SGC liability remains unpaid, the ATO can decide to issue a director penalty notice (DPN). Even without issuing a DPN, the ATO can still collect the penalty by other means, such as withholding a personal tax refund.

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The penalty will be remitted if your company pays the outstanding amount, or if it goes into voluntary administration or liquidation.

Applying penalties: When the ATO acts

When it comes to compliance, the ATO’s stated approach is to support employers who engage and try to get things right.

Firmer action is usually only taken with employers who are unwilling to meet their SG obligations. This includes employers who:

  • Repeatedly fail to pay the correct amount of SG.
  • Attempt to obstruct the ATO’s ability to determine an SGC liability.
  • Repeatedly fail to keep appointments.
  • Repeatedly fail to supply information without an acceptable reason.
  • Deliberately supply irrelevant, inadequate or misleading information.
  • Engage in any culpable behaviour to delay the provision of information.

The actual penalty the ATO will impose in these situations depends on the facts and circumstances of each case and is influenced by whether you are actively engaging with them, experiencing difficulties or simply unwilling to meet your obligations.

If you have difficulty meeting your SG obligations, the ATO has discretion to partially or fully remit a Part 7 Penalty.


Good to know

The ATO generally imposes lower additional penalties if you engage with them and you have a history of generally complying with your SG obligations.

You may be required to undertake an approved course of education if the ATO believes you failed to comply with some of your super obligations.


Non-compliance with the direction from the ATO to pay the SGC can result in court enforced penalties, imprisonment or both. The ATO also has the power to collect amounts owed directly from your bank or other third parties owing you money, and to take action that may result in bankruptcy or the winding up of your business.


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Learn more about employer super responsibilities in the following SuperGuide articles:

Quiz: Employer super responsibilities

December 1, 2020

Employee or contractor for super purposes? How to tell the difference

November 13, 2020

How to create an effective salary sacrifice arrangement with your employees

November 13, 2020

Employee super contributions for the self-employed and micro businesses

November 13, 2020

Checklist for employers: 7 tips to help you master your super responsibilities

November 13, 2020

Employer’s guide to Superannuation Guarantee (SG) contributions: Which employees are eligible?

November 13, 2020

Choosing a default fund for your employees

November 13, 2020

Calculating your employees’ SG contributions? The rules to help get it right

November 13, 2020

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If SuperGuide refers to a financial product you should obtain the relevant product disclosure statement (PDS) or seek personal financial advice before making any investment decisions.

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