Super bodies welcome ‘big win’ from payday super reform

2 May 2023
| By Rhea Nath |
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Superannuation bodies have voiced support for new government reform that would require employers to pay employees’ superannuation at the same time as their salary and wages.

The Albanese government said it would be implemented from 1 July 2026, giving employers, payroll providers, super funds, and other stakeholders sufficient time to prepare. 

“This simple change will strengthen Australia’s superannuation system and help deliver a more dignified retirement to more Australian workers,” said Treasurer Jim Chalmers in a joint statement with Minister for Financial Services Stephen Jones. 

“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.

“More frequent super payments will make employers’ payroll management smoother with fewer liabilities building up on their books.”

In 2019-2020, the Australian Taxation Office (ATO) estimated $3.4 billion worth of super, or almost 5 per cent of the total expected SG contributions for the year, went unpaid.

Such reform would make it harder for employers to exploit workers, the government said, by making it easier for employees to keep track of their super payments. 

It would also allow the ATO to use real-time monitoring to act quickly when a complaint was lodged, no longer having to wait until the end of the quarter to launch an investigation.

The Association of Superannuation Funds of Australia (ASFA) said the announcement of additional resources in next week’s Federal Budget for the ATO towards these reforms was “a necessary step in combatting the scourge of unpaid super”.

"Given the significance of the problem, a multi-faceted approach is needed. A sharper focus on recovery of unpaid SG by the ATO is one of the most effective means of driving down the SG gap for the benefit of employees,” said ASFA deputy CEO Glen McCrea.

"Left unaddressed, the issue of unpaid SG contributions comes at a significant cost to people’s retirement. For example, a 35-year-old on $65,000 per year who misses out on SG for two years would be around $24,000 worse off in today’s dollars at the time of retirement.”

Moving super payments to align with wages could help recover over $33 billion over seven years, Industry Super Australia (ISA) observed.

It said that the measure would largely benefit younger workers, casual workers, and especially lower paid workers and women who were typically short-changed

“Unpaid super can cost some women as much as 10 per cent from their final nest egg – a crushing financial blow when women already retire with about a quarter less super than men,” ISA added. 

ISA chief executive Bernie Dean added that the reform marked a “big win” for millions of Australians.

“The government should be commended for listening and then taking the necessary steps to end the huge super rip off which was undermining the future economic security of too many young women and others on lower incomes,” Dean said. 

“Aligning payment of super and wages is the right thing to do by workers, boosts government revenue, lifts investment returns and puts all employers on a level playing field.”

The Australian Institute of Superannuation Trustees (AIST) also added that digital technology could assist in implementing the reform and counter any arguments that payday super would “burden” employers.

“Historically, there has been an argument that paying more frequently than quarterly would be a burden on employers,” said AIST CEO Eva Scheerlinck.

“However, since the introduction of digital initiatives such as SuperStream and single-touch-payroll, paying super is part of an automated process, requiring no additional manual effort.

“It will also give employees and the ATO earlier visibility of under-payment or non-payment of super, meaning it can be followed up more quickly with the employer and not left to balloon into serious non-payment.”

She also encouraged employers to adopt the approach earlier than the 1 July 2026 deadline.

“There’s nothing to stop employers from paying super at the same time as wages, so I’d encourage employers wanting to differentiate themselves and be viewed as employers-of-choice to adopt the approach immediately,” she said. 
 

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Submitted by david on Mon, 05/29/2023 - 17:12

It is not going to happen.

1. Small business cannot afford the time to do this on a weekly basis.

2. More importantly my employees (and lots of other small business) will be paid monthly if this law is enacted.

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