What happens if you don't pay the SGC?
Short answer
An unpaid super guarantee charge does not sit quietly. Interest accrues daily, the ATO can garnishee the business's bank account or customers without a court order, a penalty of up to 200% can be added if a statement was never lodged, and directors become personally liable through a penalty that, for late-reported periods, only payment removes. The super guarantee charge is the debt the ATO prioritises.
What the ATO does, and roughly when
| Stage | What happens |
|---|---|
| From the due date | GIC runs daily on the unpaid charge at 11.43% p.a. (July to September 2026 rate). It is not deductible. The 10% nominal interest inside the SGC itself cannot be waived at all. |
| Statement never lodged (quarters to June 2026) | The ATO raises a default assessment and can add a Part 7 penalty of up to 200% of the charge. Voluntary lodgement before the ATO contacts you is treated far more leniently. |
| Charge assessed, unpaid 28 days (pay days from 1 July 2026) | A notice to pay is issued. If still unpaid 28 days after that, a late payment penalty of 25% of the charge is added, or 50% if you had the same penalty in the previous 24 months. That penalty cannot be remitted. |
| Any time after the debt exists | Refunds and credits are offset against it. A garnishee notice can go to the bank, or to customers who owe the business money. |
| Any time, in parallel | Each director is issued a director penalty notice for the same amount. After 21 days the ATO can sue the director personally. |
Why super is treated differently from other tax debts
Unpaid super is employees' money, and the ATO's collection approach reflects that. Four features set it apart:
- Lockdown is automatic for late reporting. For quarters up to June 2026, if the SGC statement was lodged after its due date the director penalty locks down from day one. There is no 3 month window as there is for BAS. Under payday super the penalty is understood to lock down unless the shortfall was disclosed before the ATO assessed it. Either way, liquidation does not clear a lockdown penalty. See am I personally liable for unpaid super.
- No hardship release. Serious hardship release covers income tax, not SGC, and companies cannot apply at all.
- It blocks restructuring. A company cannot enter small business restructuring until employee super that is due has been paid, so unpaid super removes one of the main rescue tools.
- The ATO can direct you to pay. For persistent non-payment the ATO can issue a formal direction to pay super, and failing to comply with a direction is a criminal offence.
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What you can still do
- Lodge anything outstanding today. Lodging is what caps the Part 7 penalty and, for old quarters, decides whether the director penalty can ever be remitted. Lodge even if you cannot pay a cent.
- Ask for a payment plan. The ATO does give payment plans for SGC, and having lodged on time helps. GIC keeps running inside the plan, and the plan does not remit a director penalty, but it stops garnishee action while it is kept.
- Ask for remission of what can be remitted. The Part 7 penalty and GIC can be remitted with a good explanation; nominal interest and the $20 per employee fee cannot. Can SGC interest and penalties be remitted explains what to ask for.
- If the company cannot recover, get advice quickly. Liquidation within 21 days of a notice remits a non-lockdown penalty, but does nothing for a lockdown one, so the choice of route depends on the lodgement history for each period.
DO NOT WAIT FOR THE NOTICE
A director penalty exists before any notice is posted, and the ATO can offset your personal refunds against it without one. The 21 days on a notice run from posting to your ASIC address, whether or not you saw it.
What to do next
- List every unpaid quarter or pay day and confirm whether each was reported to the ATO by its due date.
- Lodge any missing SGC statement or voluntary disclosure now, before the ATO raises its own assessment.
- Call the ATO on 13 11 42 about a payment plan, or ask a specialist to negotiate one, and ask for GIC and penalty remission in the same conversation.
- If the company is not viable, get written advice on the director penalty position before deciding anything.
Related questions
Will the ATO know if I just do not lodge the SGC statement?
Almost certainly. Single Touch Payroll tells the ATO what wages were paid, and super funds report what they received. The mismatch is visible, and employees can also lodge a complaint. Under payday super the ATO assesses the charge from that data itself, so there is no longer a statement to avoid.
Does the ATO chase small super debts, or only large ones?
It chases both. The amount matters less than the fact that it is employees' money, and enforcement is largely automated through data matching. Small SGC debts still attract GIC, refund offsets and director penalties, and a history of late super counts against you when the ATO decides on a payment plan or a restructuring vote.
Owe the ATO for unpaid super?
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