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12 August 2011

Directors face greater scrutiny

A media release by the Assistant Treasurer last week announced stricter and broader laws in relation to directors' liability in paying employee entitlements.

The directors' penalty regime has been extended to make directors personally liable for their company's failure to pay employees' superannuation guaranteed amounts (9% of the wage).

Furthermore, the ATO can immediately pursue directors who have not paid the guaranteed liability within 3 months after the due date.

To avoid being personally liable under the amended laws we suggest you ensure you pay the superannuation guarantee for employees within the required 3 month period after the reporting date.

Before becoming personally liable, there are other penalties the company could face.

If you don't pay enough super contribution (9% of ordinary time earnings), don't pay the super contribution by the cut off date, or don't pay super to the employee's chosen super fund you must lodge a superannuation guarantee charge statement with the ATO.

You will be unable to claim a tax deduction for the amount paid to the employees' superannuation fund and on top of this, will be required to pay the super shortfall plus fees and the superannuation guarantee charge. The superannuation guarantee charge includes a 10% interest component, along with an administration component and possibly a late penalty.

Common mistakes made by employers when it comes to super

• paying insufficient super contributions for eligible employees
• missing the quarterly cut-off dates (28 October, 28 January, 28 April, 28 July)
• not understanding that, in some circumstances, super should be paid for contractors, even if the contractor quotes an Australian business number
• not keeping accurate records
• not passing on an employee's tax file number to their super fund
• not lodging  a superannuation guarantee charge statement if they have not paid their employees' super to the fund by the due date or have not paid the correct amount

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This Newsletter, of necessity, has dealt with matters of a technical nature in general terms only. Clients should contact us for detailed information on any of the items in the Newsletter. No responsibility for loss occasioned to any person acting or refraining from acting in reliance upon any material in this Newsletter can be accepted by any member or employee of the firm.


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