Payday Super: Friend or Foe?
Payday Super: Friend or Foe?
This blog was written October 2024. Please check certified sources for updates if reading this after this date.
It would be easy to look at the statement and factsheet released by the Albanese government regarding the intended payday super legislation and think that it is either good or bad for businesses, but like a lot of the new legislation under this government relating to industrial relations and employment law, nothing is going to be that black and white.
Like with most things, whether it is good or bad will depend on your business and how you prepare for the changes to come into effect.
A large part of whether this new legislation will be a challenge for you will come down to the systems and processes that you have in your business relating to Employee onboarding, managing changes to superannuation details and the payment and management of your superannuation liabilities.
For those employers who have failed to improve their internal processes, been complacent about modernising their onboarding procedures, or held off investing in suitable fit for purpose technology tools and solutions, they will need to focus on a targeted plan to ensure that they are able to address all these areas well ahead of the 2026 target date. They will no longer be able to rely on the payroll humans in the business to be able to make up for their lack of investment.
“[Businesses] will no longer be able to rely on the payroll humans to be able to make up for their lack of investment.”
So what are the expected changes?
REMINDER: This is all still just the intentions of the legislation. There is nothing actually drafted yet so there is still plenty of opportunity for things to change from this original intent when the legislation is written.
The IntenTions
Super would need to be paid at the same time as OTE is paid (“Pay Day”). This will be determined by the date on your STP submission
“Small” and “Irregular” payments that are outside the employee normal pay cycle can be included in the next regular pay day
Payments will need to be received by the fund within 7 Calendar days (the “Due Date”)
There will be additional time allowed for new employees (Due date deferred until after 2 weeks of employment)
STP reporting will be updated to make some of the optional reporting regarding super mandatory
Super Stream data and payment standards will be revised to allow payments via the New Payment Platform (NPP) to improve error messaging and assist with expediating payment processes
The ATO will assess the interest and penalties that apply under a new SGC Charge Framework
The charge to only be calculated on Ordinary Time Earnings, not Salary and Wages
The SGC component changes to being be tax deductible, but the additional interest and penalties will continue to NOT be tax deductible
Assessments will be based on one of the following triggers:
Self reporting by the employer (through a ‘portal’)
Matching performed by the ATO using STP data
Employee reporting the late payment to the ATO
Changes will be made to choice of fund rules to make it easier for employees to nominate their fund, including employers being able to “show employees their existing stapled fun during onboarding”
The Mysteries
The impact of reporting a different date on your STP submission to that of your official payment date on determining your "pay day"
What “Small” and “Irregular” will mean for this purpose and whether there will be a different treatment for a final pay as opposed to an adjustment to a prior period.
Other than the super fund having 3 days to either allocate or return the funds to the employer, there is nothing further about the obligations on returned funds such has how long the employer has to resend the funds, and if it is remains part of the 7-day Due Date or if there is additional time to resolve the issue (especially if the employee or fund has not been forthcoming with the correct information)
How the caps will be accounted for and applied (such as MCB)
There is no information relating to how employers will be able to “show employees their existing stapled fund during onboarding” (assume this is the fanciful “improvement in software solutions” they refer too…..)
There appears to be nothing that imposes any obligation on the employee or super fund to ensure that they provide the employer with correct and complete information with any expediency
How can you prepare for the changes?
Our number one recommendation to anyone is to pretend that you need to implement it now and consider what is holding you back from doing so.
If possible, even try and implement more frequent payments ahead of the deadline so you can fail safely before the regulations come in and while there is no penalty for failing to meet the deadline should something happen. If you already pay super based on your payment cycle, then try and implement the 7-day deadline to stress test your processes.
Here are some questions to ask yourself:
How long does it currently take you from start to finish to submit your super contributions?
Does your super contribution payment process (Payroll to Fund) currently take several hours, days or weeks to prepare, reconcile and submit?
How do you collect the information from employees?
How often do you get incomplete, or incorrect information, or do not get the information prior to the employee commencing?
What tools or systems do you use to collect and validate super information?
Does the business need to consider the cashflow implications of the change and thus need to transition over a period of time (Quarterly, to monthly, to pay cycle) to smooth the burden?
How do you manage returned super funds, and what are the causes of them?
What next?
We are really interested to collect more information on the issues that you identify or concerns you have while there is still some opportunity during the legislative and administrative design phase to hopefully encourage some mechanisms to put some accountability on the employee and super fund to ensure that they provide the information to the employer. Personally, I still feel this is a key element that is not being heard by the legislators.
Gemma McDonnell-Mossop
Director | Independent Payroll Consultant
Payroll Edge Consulting are all about helping businesses do payroll better.
If you think your business needs help understanding the impact of payday super on your business then contact us at info@payrolledge.com.au to book a free initial consultation to see how we could help your business.
Because… that’s how we payroll…
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