On 2 May 2023 Treasurer Jim Chalmers and Assistant Treasurer Stephen Jones transmitted a joint media release detailing important changes to the way that super is paid by employers and received by employees.
As the statement professed,
“The Albanese Government is committed to strengthening the superannuation system so that it is equitable, sustainable and delivers better outcomes for all Australians.”
Payday super will necessitate that employers pay their worker’s super contributions at the same time they process payroll for salaries and wages.
The super changes are not yet legislated, however, they are widely expected to become so.
How does super currently work?
At the moment, as an employer, you’re required to regularly contribute payments to a nominated super fund on behalf of your eligible employees.
Although you can also nominate to pay more frequently, under the current super guarantee, you must pay your employees their owed super at least each quarter.
Penalties may apply for underpayments, or payments not made before the due dates.
The current quarterly super due dates are as follows:
|1||1 July – 30 September||28 October|
|2||1 October – 31 December||28 January|
|3||1 January – 31 March||28 April|
|4||1 April – 30 June||28 July|
What’s payday super and what will be changing?
Under the proposed plan by the Albanese government, payday super will commence from 1 July 2026.
As the changes will mean employers must pay their employees’ super at the same time they pay wages or salaries, if your payroll frequency is fortnightly or monthly, these changes mean that you will also simultaneously pay super in this process.
For Australian businesses, this also signals changes to payroll processes at large, (alongside the direct amendments to when you pay your employees’ super.)
Although not on the immediate horizon, the relevant industries and stakeholders will begin work on the changes in the second half of 2023.
(As we have a few years before the changes will take effect, payroll providers, super funds, and employers themselves will have the necessary time to implement changes to the current system.)
Why are these changes occurring?
The crux behind the changes comes from several realisations and aspirations. Firstly, one aim is to get more super into the pockets of workers come retirement.
As Assistant Treasurer Stephen Jones said,
“By switching to payday super, a 25-year-old median income earner currently receiving their super quarterly and wages fortnightly could be around $6,000 or 1.5 per cent better off at retirement.
The change will particularly benefit those in lower-paid, casual, and insecure work who are more likely to miss out when super is paid less frequently. Women are overrepresented in this group.”
Secondly, there are unfortunately some unscrupulous employers out there who fail to pay, or underpay, super to their workers. By necessitating that super contributions are paid simultaneously these instances are reduced. Assistant Treasurer Stephen Jones continued,
“While most employers do the right thing, the Australian Taxation Office (ATO) estimates $3.4 billion worth of super went unpaid in 2019–20.
To further strengthen the system, the ATO will receive additional resourcing to help it detect unpaid super payments earlier and the Government will set enhanced targets for the ATO for the recovery of payments.”
Finally, these changes will also make the entire process of super contributions smoother and more transparent for both workers and employers.
From an employer’s perspective, managing payroll and super together in one go will make the management and administrative aspect smoother and simpler. From a worker’s perspective, there will be increased transparency around how much super they’ve been paid, and what their current balance is.
For more information, you can read the Treasurer’s media release.