Super costs add up quickly and they can become a problem for a small business. At almost 10 per cent of base wages, Super is an expense that business owners need to plan for. And, unlike other business costs, the supplier doesn’t send an invoice. Rather it’s up to the business owner to calculate the Super payable and remember to pay it.
Taking these things into account, it’s likely that some of your franchisees are skipping their Super payments. Here’s why skipped Super happens and how you can help franchisees avoid this problem.
The cost of unpaid Super
Late Super payments can become a big deal – and expensive. To start with, they trigger the Super Guarantee Charge (SGC), which is a penalty for late payment. The SCG adds to the costs of the business and it’s not deductible for tax purposes. On top of this, directors are personally liable for unpaid Super.
The price of late Super doesn’t only involve money. There’s also a stress factor that comes into play. A business owner who has debts to pay and who is struggling to meet them is likely to be feeling anxious. Apart from the obvious health consequences this can mean they are less effective in their work, with repercussions for service quality and as a result, sales.
How does skipped Super happen?
Given the way Super liabilities are calculated, tracked and paid, it’s not surprising that payments get missed. The good news is that when we understand why it happens we can put in place systems to help avoid the problem.
The first reason Super gets missed is that the owner doesn’t remember the payment is due. It’s easy to remember a task when we need to repeat it frequently and have a visual reminder. For example, watering a plant – or paying staff. However, we’re more likely to forget something we don’t need to do often, such as changing the battery in a smoke alarm. Super payments are more like the smoke alarm than the plant.
At the root of the problem is that Super is paid quarterly whereas wages are paid weekly or monthly. A business owner might not even be aware of the Super due on employee wages. It can slip by un-noticed, just a line on a payslip and an entry in their accounting records. It’s then up to the owner to remember to pay the Super.
The second reason Super payments are missed is that there isn’t money available to pay the bill. Many franchisees simply don’t have enough working capital. They pay whichever bill is most pressing. Yes, they should put aside money for Super, but what if a piece of equipment breaks down, or someone falls sick and needs expensive medical treatment?
How to stay on top of Super
A great start is to put aside money for Super whenever a wages payment is made. For instance, a franchisee could set up an regular transfer to a second bank account each time a wages payment is made.
However, for some businesses there just isn’t enough money to pay everyone. When payday comes they are struggling to cover the wages, let alone the Super. In this case, the answer is a budget, and a plan to increase sales and reduce costs.
It’s also good to set up a reminder to pay the Super. A diary note can work well, and it’s best if the reminder is immediately after the quarter end so there’s time to get the money together.
These three things will help franchisees stay on top of their Super obligations and avoid falling foul of the ATO.