Jul 8, 2024 Joel Hernandez

Payday Super proposal

Following the federal government’s announcement in the 2023-24 Budget, Treasury released a consultation paper in October 2023 on Securing Australians’ Super.

While most employers do the right thing paying employees’ super on time, the ATO estimates that $3.4 billion worth of super went unpaid in 2019-2020.

A proposal, which is expected to be implemented from 1st July 2026, is to require employers to pay employee super earlier and more frequently. This will be called ‘payday super’.

Under the current arrangement, super guarantee is paid monthly or quarterly, and does not necessarily coincide with the employer’s payroll cycle. If SG is not paid on time, then an additional charge applies to calculate the shortfall in super contributions, plus a nominal interest calculation that represents lost super earnings. This shortfall in super is also not tax deductible for the employer.
Under payday super, employees’ super will be required to be paid at the same time as their salary and wages. Hopefully payday super can be integrated with the payroll cycle’s usual system and processes.

Some of the advantages that have been mentioned with this new system are:

• More frequent super payments will maximise super earnings for employees
• There may be efficiencies with the payroll function to mitigate the risk of late payment
• Underpayments can be identified in a timely manner
• The ATO will have enhanced real-time reporting and integration with Single Touch Payroll
• Penalties will only apply for egregious non-compliant behavior; but flexibility and discretion will be offered for employers to amend and revise for honest mistakes

Some potential downsides for employers include:

• Detriment to cash-flow on the business, as a result of having to pay super earlier
• Administrative burden for small employers who do not have a dedicated payroll team
• Increasing the frequency of super payments increases the risk of late payment, potentially resulting in additional compliance costs and penalties;
• Increased red tape may result in time taken away from focusing on business growth

This proposal is still in the review stage, but we will keep you informed as it develops.