Facts
Employer R has paid SG but consistently late (being after the 28th day of the end of the Quarter), for example:
Quarter ending 31 March 2021 – payment made on 10 May 2021 for $2,000
Quarter ending 30 June 2021 – payment made on 15 August 2021 for $2,000
This issue has been picked up in reviewing the Quarter ending 30 September 2021.
The next SG payment is due 28 October 2021 for $2,100 and is paid on 20 October 2021. The SGC statement is lodged on 25 October 2021.
Question
Does the application of the carry-forward payment method achieve a better outcome than the late payment offset method?
Answer
Yes.
The SGC statement must show that the carry-forward payment method was used to calculate any SGC by not nominating the relevant late payment offset.
Tax Tip
Firstly, it is important to understand the late payment offset method and its implications.
Re: Quarter ending 31 March 2021
The payment on 10 May 2021 for $2,000 can be nominated as a late payment offset for this Quarter.
The SG to be paid is $nil.
The nominal interest is charged from 1 January 2021 to 25 October 2021.
The admin fee is also charged.
Re: Quarter ending 30 June 2021
The payment on 15 August for $2,000 can be nominated as a late payment offset for this Quarter.
The SG to be paid is $nil.
The nominal interest is charged from 1 April 2021 to 25 October 2021.
The admin fee is also charged.
Re: Quarter ending 30 September 2021
The SG of $2,100 is paid on time, there is $nil SGC.
The above is compared against the Carry-forward method and its implications.
Re: Quarter ending 31 March 2021
The payment on 10 May 2021 for $2,000 is not nominated as a late payment offset for this Quarter.
In respect of the payment of $2,100 on 20 October 2021 - $2,000 is nominated as the late payment offset for this Quarter – slight but distinct difference to late payment offset method above.
The nominal interest is charged from 1 January 2021 to 25 October 2021 – same result as late payment offset method.
The admin fee is also charged – same result as late payment offset method.
Re: Quarter ending 30 June 2021
The payment on 10 May 2021 for $2,000 is nominated as an on-time payment for this Quarter.
As it was fully paid on time, there is $nil SGC.
Under the carry-forward method, there is $nil nominal interest and $nil admin fee charged for this Quarter whereas under the late payment offset method, nominal interest and admin fee were charged. This is the cost saving.
Re: Quarter ending 30 September 2021
The payment on 15 August 2021 for $2,000 is nominated as an on-time payment for this Quarter.
In respect of the payment of $2,100 on 20 October 2021 – the remaining $100 is nominated as an on-time payment for this Quarter.
As it was fully paid on time, there is $nil SGC – same result as late payment offset method.
Other points to note:
The calculation must be applied for each employee
The latest quarter an amount can be carried forward must be within 12 months after the payment date, which is, in effect, 4 x subsequent quarters
if there is only 1 x late payment, the carry-forward method may not provide a better outcome
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