Payday Superannuation Payments

Payday Super

Treasury has recently released its Payday Super factsheet which provides further details about the Government’s Payday Super measure – where superannuation will be paid with each payday.

Payday Super: A Comprehensive Overview

The Australian Government’s introduction of the Payday Super reform marks a significant shift in the Superannuation Guarantee (SG) system. This reform, part of the 2023-24 Budget’s Securing Australians’ Superannuation Package, aims to synchronize the payment of SG contributions with employees’ salary and wages, moving away from the current quarterly requirement. This change is set to take effect from 1 July 2026.

Key Benefits for Employees

The Payday Super reform is designed to enhance the superannuation system, ensuring a more secure retirement for Australian workers. By receiving superannuation contributions more frequently, employees can better track their entitlements and reduce the risk of unpaid superannuation.

Enhanced Compliance and Enforcement

The reform introduces stricter compliance measures to deter superannuation theft. Employers will be required to make SG contributions at the same time as salary and wages, with contributions needing to be received by employees’ superannuation funds within seven days of payday. This change aims to ensure timely and accurate superannuation payments.

Potential Challenges and Concerns

While the Payday Super reform has clear benefits, it also presents challenges. One concern is the automatic counting of late contributions towards the earliest payday with an outstanding SG shortfall, which could create a series of SG charges until the point of catch-up payment. This places a significant onus on employers to promptly rectify any errors.

Additionally, the updated SG charge framework includes several deterrence components, such as a daily compounding interest rate and an administration uplift of up to 60%. These measures are designed to incentivise employers to quickly disclose and rectify unpaid superannuation but may also increase the administrative burden on businesses.

Compliance

Employers who fail to comply with the Payday Super requirements will face several penalties designed to ensure timely and accurate superannuation contributions:

1. Superannuation Guarantee (SG) Charge

The SG charge will be updated to reflect the seriousness of non-compliance in the Payday Super environment. It includes:

• SG Shortfall Amount: The unpaid superannuation contributions.
• Daily Interest: Calculated at the general interest charge rate on a compounding basis (currently 11.36% per annum)¹.
• Administrative Uplift: An additional charge of up to 60% of the SG shortfall amount to cover enforcement costs¹.

2. Additional Penalties

• General Interest Charge: Continues to accrue on any outstanding SG shortfall and notional earnings amounts after assessment by the ATO¹.
• SG Charge Payment Penalty: Up to 50% of the outstanding unpaid SG charge amount if not paid within 28 days of the notice of assessment¹.

3. Non-Deductibility of Penalties

While the SG charge itself is tax-deductible, any penalties and interest assessed by the ATO after the SG charge assessment are not deductible¹.

4. Increased Scrutiny and Compliance

The ATO will have increased visibility over payroll data and superannuation fund reporting, allowing for proactive compliance monitoring. Employers who repeatedly fail to comply may face escalating penalties.

5. Voluntary Disclosure Incentives

Employers who voluntarily disclose unpaid superannuation and take steps to rectify the shortfall may receive a reduction in the administrative uplift charge¹.

How can you prepare?

Employers can take several steps to prepare for the implementation of Payday Super: 

1.  Ensure that your payroll systems are capable of processing superannuation contributions on a more frequent basis. This might involve updating software or working with your payroll provider to ensure compliance with the new requirements. Xero has advised that it will be updating it’s software to accommodate these changes.

2.  Provide training for your payroll and HR staff to ensure they understand the new requirements and processes. This will help prevent errors and ensure timely contributions. 

3.  Revise your internal policies and procedures to reflect the new Payday Super requirements. Ensure that all relevant documentation is updated and that employees are informed about the changes. 

4.  Establish clear communication channels with the superannuation funds you work with. This will help ensure that contributions are processed smoothly and any issues are quickly resolved. 

5.  Implement regular checks to ensure that superannuation contributions are being made on time and in the correct amounts. This can help identify and rectify any issues before they become significant problems. 

6.  Frequent superannuation payments may impact your cash flow. Plan accordingly to ensure that your business can meet these obligations without financial strain. 

7.  Consider consulting with us to ensure that your business is fully prepared for the changes.

By taking these steps, employers can ensure a smooth transition to the Payday Super system and avoid potential penalties or compliance issues. If you have any specific concerns or need further assistance, feel free to ask!