What employers need to know about Super Guarantee penalties

The Australian Tax Office (ATO) is responsible for enforcing compulsory super obligations for employers. Data about employee wages from single touch payroll (STP) and reporting from super funds reflecting contributions is matched to ensure entitlements from each payday reach super funds on time.

When contributions are late or unpaid, the ATO automatically issues an SGC assessment notice to the employer. The assessment accrues interest at the general interest charge (GIC) rate until it’s paid.

SGC assessments must be paid within 28 days. If an assessment remains unpaid after this time, the ATO will issue a ‘Notice to Pay’. If this notice is unpaid after a further 28 days, a late payment penalty will apply.

How the SGC is calculated

When you don’t meet your super obligations, the ATO will issue you with an SGC statement showing the penalty you owe. If multiple paydays are affected, you will receive a separate SGC assessment for each one.

The SGC is made up of four components:

1. Any SG contribution that remains unpaid at the time of the assessment
2. Notional earnings on late contributions
3. An administrative uplift amount
4. Choice loading (if applicable).

The notional earnings component is calculated by the ATO at the GIC rate for each day a contribution is late. Interest is compounded daily until the contribution is paid in full or the ATO issues you with an assessment, whichever comes first. If you pay part of the contribution before you receive an assessment, interest will continue to accrue only on the unpaid portion.

Before the ATO issues you with an assessment, any further contributions you make to an employee’s super fund are automatically used to reduce unpaid SG contributions from the earliest payday with an outstanding liability.

The administrative uplift amount is 60% of the unpaid SG contributions and notional earnings. It can be reduced if you have not received a recent penalty and if you voluntarily tell the ATO your contributions are late (see reducing your penalty below).

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The choice loading applies if you paid contributions to the wrong fund according to choice of fund requirements and if you failed to offer an eligible employee a choice of super fund. This component of the SG charge is 25% of contributions for any payday when you did not follow the choice of fund rules, up to a maximum of $1,200.

Reducing your penalty

The administrative uplift component of the SGC is the penalty portion. It is kept by the ATO to cover the cost of enforcing SG compliance. The remaining SGC, and the interest that accrues on it, is forwarded to your employee’s super fund to compensate them.

The ATO will reduce the administrative uplift by applying discounts if you have not received a penalty since 1 July 2026 and if you voluntarily disclose your late contributions.

Before discounts, the administrative uplift is 60% of the outstanding SG contribution and notional earnings. The discount for not having a previous penalty is 20%. The discount for voluntary disclosure is:

• 40% if you notify the ATO within 30 days of payday
• 35% if you notify the ATO 31–60 days after payday
• 30% if you notify the ATO 61–120 days after payday
• 15% if you notify the ATO 121 days or more after payday.

The discounts are combined if you are eligible for both. For example, if you do not have a previous penalty and you told the ATO about your late contribution within 30 days of payday, the administrative amount will be reduced to zero (60% initial penalty – 20% for a clean record – 40% for early disclosure).

Voluntary disclosures must be made to the ATO in the approved form. Visit their website for information about how to do it.

Charges when you don’t pay an SGC assessment on time

If you have not paid your SGC assessment within the 28-day deadline after it was issued, the ATO will issue a ‘Notice to Pay’. If this notice is unpaid after a further 28 days, a late payment penalty will apply.

The late payment penalty is 25% of the outstanding amount, or 50% of the outstanding amount if you have received the same penalty during the last two years. The ATO does not have the power to waive it.

Claiming a tax deduction

The SGC that applies under Payday Super is tax deductible for employers.

You can claim a deduction for the amount on your SGC assessment in the year you pay it. Interest that accrues on the assessment between the day you receive it and when you pay it is not tax deductible.

Under the law that applied prior to 1 July 2026, the SGC was not tax deductible for employers. If you pay an outstanding SGC amount related to the previous quarterly super deadlines that payment is not tax deductible.