Announced in the 2023-24 Budget as part of the Securing Australians’ Superannuation Package, the Government’s Payday Super measure is set to officially take effect on 1 July 2026. Now is the time to amend your payroll processes and ensure your business’s cash flow is prepared to handle this change when the new rules come into force.
It can take an average of approximately 66 days to form a habit – don’t wait until those days prior to 1 July 2026 to establish this very important habit affecting those you employ!
These new measures aim to address the issue of unpaid and underpaid superannuation, which can have a detrimental impact on employee’s retirement savings. Unfortunately, it is reasonably common practice for many businesses to significantly delay payment of employee super as a means of preserving cash flow, but now the Federal Government is intervening to prevent this from happening.
Employers will need to pay Super Guarantee alongside Wages
Upon commencement of the new measures, Australian employers must make Superannuation Guarantee (SG) contributions on the same day they pay employees their regular wages (payday). These contributions must be received in the employee’s superannuation fund within seven calendar days of payday. There are a few exceptions, such as for new employees and small, irregular payments.
Updated Super Guarantee Charge
Employers who fail to make full and timely superannuation contributions will be subject to a Superannuation Guarantee (SG) charge. This charge is designed to ensure employees receive the full amount they’re entitled to and incentivise employers to address any unpaid superannuation promptly. The SG charge will be calculated based on the delay in payment and may include penalties and interest. Employers will be able to claim the SG charge as a tax deduction, but not any associated penalties or interest.
Transition to PayDay Super
Several changes are being implemented to support the transition to Payday Super and protect employees:
- Faster contribution processing: Superannuation funds will have a reduced deadline to allocate or return contributions.
- Improved payment methods: The SuperStream standards will be updated to allow payments via the New Payments Platform and provide better error messaging.
- Retirement of the Small Business Superannuation Clearing House: This service will be retired in 2026, with small businesses encouraged to transition to other suitable options.
- Simplified choice of fund process: Employees will have an easier time nominating their superannuation fund when starting a new job.
- Limited advertising of superannuation products: Only MySuper products that have passed the performance test will be allowed to be advertised during onboarding.
Australian Taxation Office compliance approach
The ATO will have increased visibility of superannuation contributions, allowing them to proactively identify and address missing or late payments. Employers are responsible for ensuring timely SG payments and will face penalties for repeated failures. Voluntary disclosure of non-compliance can reduce penalties. Employees will be able to check their superannuation accounts to verify if employers are meeting their obligations and can act if necessary.
Next Steps
The proposed legislation will be developed further in the second half of 2024. The ATO will consult with industry to gather feedback on the administrative aspects of the changes. Based on these discussions, there may be minor adjustments to the specific details outlined in this article.
Bottom line for business: the main impact for most businesses is cashflow. Business needs to come to grips with the fact that super is no longer something that can be postponed by a month (or a quarter); it needs to be paid on the same day as wages.
If you and your business require assistance or you would like to have a cashflow check, please don’t hesitate to contact our team.