Superannuation guarantee charge (SGC)

Definition

The superannuation guarantee charge (SGC) is a mandatory contribution that employers in Australia are required to make on behalf of their eligible employees to their superannuation funds. 

What is the superannuation guarantee charge?

The SGC requires employers to contribute a percentage of their employees’ earnings to their nominated superannuation funds. This contribution is mandatory for most employees who earn $450 or more (before tax) in a calendar month and are aged 18 or over. It applies to full-time, part-time, and casual employees, as well as contractors who meet certain criteria.

The current contribution rate for the superannuation guarantee is set at 10% of an employee’s ordinary time earnings. However, this rate is subject to change over time as determined by government legislation. Employers are responsible for calculating and making these contributions on behalf of their eligible employees.

Employers are required to make superannuation contributions at least quarterly. These contributions must be made in addition to employees’ regular wages or salaries and cannot be deducted from employees’ earnings.

If employers fail to meet their superannuation obligations, they may be liable for the superannuation guarantee charge. It’s a penalty imposed by the ATO and consists of the unpaid superannuation contributions, nominal interest, and an administration fee.

Employees have the right to check whether their employer is making superannuation contributions on their behalf and to request details of their superannuation accounts. They also have the option to choose their own superannuation fund, although employers may have a default fund for employees who do not make a choice.

Example of the superannuation guarantee charge

ABC Pty Ltd fails to make superannuation contributions for its employees by the quarterly due date. As a result, the company incurs a superannuation guarantee charge liability.

Upon realising the oversight, ABC Pty Ltd promptly calculates the unpaid superannuation contributions, nominal interest, and administration fee required to fix the shortfall. The company then files an SGC statement and pays the SGC liability to fix the non-compliance.