Superannuation Guarantee Charge: The Director's Personal Exposure

Key Takeaways

• For quarters up to 30 June 2026, superannuation guarantee contributions were due 28 days after the end of each quarter. Missing the date triggers the superannuation guarantee charge for that quarter, which adds nominal interest and an administration component, is calculated on a broader earnings base and is not tax deductible.
• For quarters ending on or before 30 June 2026 the company had to lodge an SGC statement by the SGC due date, one month after the quarterly payment deadline. Lodging by that date preserved the standard DPN remission options; lodging after it or not at all, locked the director penalty down so that only payment in full removes personal liability. For paydays from 1 July 2026 there is no SGC statement and lockdown has to be checked payday by payday under the amended legislation.
• The ATO can estimate unpaid SGC from single touch payroll and super fund data and the law treats estimates as never reported. A company that goes quiet on super hands the ATO a locked down penalty against every director.
• A reasonably arguable position defence exists for SGC, most commonly around genuine contractor classification. It protects considered positions taken with reasonable care, not questions the company never asked.
• The payday super legislation passed Parliament in November 2025 and took effect on 1 July 2026. A contribution for a regular pay run must now ordinarily reach the fund within 7 business days of payday and the compliance failure points have multiplied from four dates a year to every pay run.

1. 1.How Unpaid Super Becomes the SGC
2. 2.Where the Director Penalty Bites
3. 3.The Reasonably Arguable Position Defence
4. 4.Beyond the DPN: Directions and Criminal Exposure
5. 5.Payday Super From 1 July 2026
6. 6.The Position in One Paragraph

Directors treat unpaid super as a cash flow item, one creditor among many to be juggled in a tight month. The law treats it differently. Employee superannuation sits behind a personal liability regime stricter than the one covering PAYG withholding and GST, the courts treat it as employees' deferred wages rather than the company's money and the safe harbour and restructuring regimes both close their doors to companies that have not kept it current. Of everything a struggling company can choose not to pay, super is the most expensive choice available.

If the company is behind on super now, the sections below explain why a lodgement date decided the directors' position under the quarterly rules and what changed when payday super began. Contact Astris Law on (07) 3519 5616 for advice on your position.

How Unpaid Super Becomes the SGC

Employers must pay superannuation guarantee contributions for each eligible employee. Until 30 June 2026 the contributions were due 28 days after the end of each quarter, so 28 October, 28 January, 28 April and 28 July.

Where a quarterly deadline was missed, even by a day, the Superannuation Guarantee (Administration) Act 1992 (Cth) converted the obligation into the superannuation guarantee charge. That quarterly SGC is deliberately worse than the contribution it replaces in four ways. It is calculated on the employee's salary and wages rather than the narrower ordinary time earnings base, it adds nominal interest at 10% per annum running from the start of the quarter, it adds a $20 administration component per employee per quarter and unlike ordinary contributions it is not tax deductible.

For quarters ending on or before 30 June 2026 the company then had to lodge an SGC statement reporting the shortfall. The statement was due one month after the quarterly payment deadline, so 28 November, 28 February, 28 May and 28 August for the respective quarters. That lodgement date, not the payment date, was the one that decided the directors' personal position.

Where the Director Penalty Bites

The director penalty regime in Division 269 of Schedule 1 to the Taxation Administration Act 1953 (Cth) makes each director personally liable for the company's unpaid SGC. The mechanics mirror the PAYG withholding and GST rules covered in our flagship DPN guide, with one harsher feature.

For PAYG withholding and GST, the company has 3 months after the due date to report before the penalty locks down. For SGC on quarters ending on or before 30 June 2026 there was no such grace. If the company lodged the SGC statement by the SGC due date, a director served with a DPN can still remit the penalty within 21 days through payment, administration, small business restructuring or winding up. If the company lodged even one day after the SGC due date or never lodged, the penalty is locked down and only payment in full removes it. For paydays from 1 July 2026 there is no SGC statement and whether a payday's penalty is locked down has to be checked payday by payday under the amended legislation. Our lockdown DPN guide explains what that classification means in practice.

The ATO does not need the company's cooperation to get there. Single touch payroll tells it what wages were paid, fund reporting tells it what contributions arrived and the gap between the two supports an estimate of unpaid SGC. The law treats estimated amounts as never reported, which means locked down penalties against every director without a single lodgement by the company.

The exposure also reaches incoming directors. A new director becomes liable for SGC amounts due before their appointment unless the company pays, appoints an administrator or restructuring practitioner or begins winding up within 30 days. Because super arrears in small companies are commonly old and commonly unreported, the inherited penalties are usually already locked down. Checking the super position is the single most important piece of due diligence before accepting any directorship.

The Reasonably Arguable Position Defence

The statutory defences of illness and all reasonable steps apply to SGC penalties as they do across the regime and the courts construe them narrowly. SGC adds a third defence with real work to do. A director is not liable where the company applied the Superannuation Guarantee (Administration) Act in a way that was reasonably arguable and took reasonable care in doing so.

The classic territory is worker classification. A company that genuinely considered whether its workers were employees or contractors, took advice, documented the analysis and got it wrong has a defensible position. A company that simply labelled everyone a contractor and never asked the question does not. The extended definition of employee in the superannuation legislation captures many workers who are contractors at common law, including some paid principally for their labour, so the classification question deserves more care than most small companies give it. The defence rewards the company that asked properly and protects nobody who never asked.

Beyond the DPN: Directions and Criminal Exposure

The DPN is the main enforcement tool but not the only one. The ATO can issue a direction to pay superannuation guarantee charge, requiring the company to pay within a specified period. Failure to comply with the direction is a criminal offence carrying fines and imprisonment of up to 12 months. The direction regime targets employers who can pay and choose not to and it sits on top of the directors' civil exposure rather than replacing it.

Unpaid super also feeds every other solvency consequence. Unpaid employee entitlements, including super, disqualify the company from the insolvent trading safe harbour in s 588GA and from small business restructuring eligibility. A company carrying super arrears has quietly lost access to the two main statutory tools for trading through difficulty, which is something its directors should hear from an advisor before a liquidator explains it later.

Payday Super From 1 July 2026

The quarterly cycle described above ended on 30 June 2026. The payday super legislation passed Parliament in November 2025 and commenced on 1 July 2026. From that date employers must pay superannuation at the same time as wages and a contribution for a regular pay run must ordinarily reach the employee's fund within 7 business days of payday.

For directors the change has three consequences worth understanding now. The compliance failure points multiply, because a company that could previously fall behind four times a year can now fall behind every pay run and the SGC machinery updates to match the new cycle. The float disappears, because businesses that used accrued super as working capital between quarterly deadlines lose that liquidity from day one and the businesses most reliant on the float are the ones closest to insolvency already. And the ATO's visibility becomes effectively real time, because single touch payroll already reports each pay event and fund reporting will show within days whether the matching contribution arrived. Late super in 2027 will not be a problem the ATO discovers at quarter end. It will be a problem the ATO can see by the following week.

Directors of companies with thin cash flow should test each pay run against the 7 business day deadline rather than wait for the first missed one.

The Position in One Paragraph

Pay super on time because every alternative is worse. For any quarter to 30 June 2026 still unreported, the SGC statement is already late and because lodgement on time was what kept the directors' remission options alive, a director penalty for that quarter can now be remitted only by payment in full. Get worker classification reviewed properly, because the reasonably arguable position defence only protects companies that did the analysis. Check the super position before joining any board and treat ATO correspondence about super as personal rather than corporate mail.

This guide is part of our Director Liability and ATO Compliance hub, which collects the full series alongside our related guides on insolvency and directors' duties.

If the company is behind on super or you have received a DPN for SGC amounts, please get in touch or call (07) 3519 5616.

This article is for general information purposes only and does not constitute legal advice and should not be relied on as such. While we take reasonable care to ensure the accuracy of the information provided, we make no representations or warranties as to its completeness, currency or reliability. We accept no liability for any loss or damage arising directly or indirectly from the use of or reliance on, this website's content. You should always seek professional advice tailored to your specific circumstances before acting on any information in this article. Liability limited by a scheme approved under Professional Standards Legislation.

Astris Law is not a registered tax agent and does not provide tax advice. References to tax law in this article describe the legal framework only. For tax advice specific to your circumstances, consult your registered tax agent or accountant.