Salary sacrifice contributions - contributions made under a salary sacrifice arrangement are “sacrificed contributions” and cannot be used to reduce the charge percentage under s 23 (s 23(2) excludes sacrificed contributions). However, sacrificed salary or wages amounts are included in the quarterly salary or wages base for calculating the shortfall (s 19(1) definition). This means salary sacrifice does not reduce the employer’s liability; the employer must still contribute the required percentage on the sacrificed amounts as ordinary time earnings. Conversely, ordinary time earnings that are sacrificed can be added to the ordinary time earnings base for calculating reductions under s 23 (s 23(2) definition of ordinary time earnings base includes sacrificed ordinary time earnings amounts). The complexity lies in correctly tracking which amounts are sacrificed and which are not.
The administration component per employee - the administration component is $20 per employee with a shortfall, plus any prescribed base amount (s 32(1)). This can accumulate quickly for employers with many under‑contributed employees. The component is not reduced by late payment or offset; it is part of the charge that must be paid. It is also excluded from the original unpaid amount for GIC purposes (s 49(2)), but that is a small consolation.
Choice of fund penalty cap - if an employer makes contributions that do not satisfy the choice of fund requirements, the individual shortfall is increased by the notional quarterly shortfall per day of breach, subject to a cap of $500 per employee per notice period (s 19A). The cap can be reached across multiple quarters within the same notice period. Once the cap is hit, further shortfall increases for that employee in later quarters within the same notice period are nil (s 19A(3)). This limits the penalty but also means employers need to monitor their notice period.
Stapled fund acceptance failure - if the Commissioner notifies the employer that a particular fund is the stapled fund, but that fund refuses to accept the contribution, the employer may still qualify for a reduction of the shortfall if they make the contribution to any fund after the 28‑day window (s 19(2F), (2G)). However, the Commissioner’s guidelines must be followed (s 21(2)). This is a trap if the employer does not attempt to contribute to the stapled fund promptly.
Defined benefit schemes and choice of fund - where an employer uses a defined benefit scheme to satisfy the charge, and the employee cannot choose another fund because the scheme is in surplus or the employee has maxed out benefits, the employer must ensure that the scheme meets the conditions in s 20. If it does not, and contributions would not be in compliance, the shortfall is increased under s 19(2B). The increase is subject to the $500 cap. The employer must obtain actuarial certificates to prove surplus (s 20(2)(c)).
Conversion notices - trustees of superannuation funds may give a conversion notice to treat a scheme as a defined benefit scheme (s 6B). If such a notice is given, contributions made while it has effect cannot be taken into account under s 23 (s 23(8A)). This can surprise employers who rely on those contributions to reduce their charge percentage.
Employer shortfall exemption certificate timing - the application must be made at least 60 days before the first day of the quarter (s 19AB(2)(c)). Missing this deadline means the certificate cannot be obtained for that quarter. The Commissioner is deemed to have refused the application if no decision is given within 60 days after the application (s 19AC(4)).
Offsets under s 23A - an election to offset a late contribution against the charge is irrevocable and cannot be applied to any other quarter. The offset reduces the nominal interest component first, then the individual shortfall (s 23A(4)). The contribution cannot also be used under s 22 or 23 (s 23A(5)). The election must be made in the approved form within four years of the original assessment.
Record‑keeping offence - a strict liability offence with a maximum penalty of 30 penalty units exists for failure to keep records (s 79(6)). There is a defence of reasonable excuse (s 79(6A)). The records must be kept for five years (s 79(4)). This is often overlooked by small employers.
Partnerships and unincorporated associations - liability for money is imposed on partners jointly and severally, and on members of unincorporated associations jointly and severally (ss 72(3), 73(4)). Officers of unincorporated associations are personally liable for penalties (s 73(5)). This exposes individuals beyond the entity.