Superannuation and Business Sales
When selling a business, is superannuation apportioned between the buyer of the business and the seller like other accrued entitlements (e.g. annual leave)?
Unless superannuation is paid through a superannuation scheme created by the business owner, the parties do not need to adjust for superannuation on the completion of a business sale.
As superannuation is normally payable quarterly in arrears, the Seller of the business will simply pay their required contributions during that period for that part of the period which they owned the business. Similarly, the Buyer will do the same. No adjustment is required to be made at settlement.
For example:
- John buys the business Congo Manufacturing from Dave on 1 August 2011;
- By law, superannuation is paid for this quarter 1 July 2011 to 30 September 2011 in arrears on 28 November 2011;
- On or before 28 November 2011, Dave will have to pay superannuation (as he always did) on salaries paid to 31 July 2011 (the settlement date);
- By the same date, John will have to pay superannuation to the employees’ nominated superannuation funds on salaries paid from 1 August 2011 to 30 September 2011.
However, in this example, would the buyer, John, have any liability to pay superannuation for the period before settlement (1 August 2011) if Dave failed to do so? Should there be an adjustment at settlement for this?
The answer is no. This is because, strictly speaking, the law does not actually impose an obligation on the employer to pay superannuation. However, if the employer fails to do so for any given period, the employer will be required to pay the government a “Superannuation Guarantee Charge” which normally includes the amount that was required to be paid plus penalties and interest. (Once paid, the government will use the Charge amount paid for the benefit of the employees whose entitlements where not met.)
Therefore, as long as the buyer makes their required superannuation payment on salaries paid from settlement, they will not be liable.
If superannuation is paid through a superannuation scheme created by the Seller, the appropriate solution is more complex and will be dependent on the terms of the superannuation trust deed. In this case, the parties should seek legal advice.
Joe Kafrouni, Legal Practitioner Director, Kafrouni Lawyers
Disclaimer
The information provided by Kafrouni Lawyers is intended to provide general information and is not legal advice or a substitute for it. Business people should always consult their own legal advisors to discuss their particular circumstances. Kafrouni Lawyers makes no warranties or representations regarding the information and exclude any liability which may arise as a result of the use of this information. This information is the copyright of Kafrouni Lawyers.
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