In May 2023, the federal government announced its intention to require employers to pay their employees' super on pay day, replacing the current quarterly contribution requirements. This change is intended to come into effect from 1 July 2026.
One of our key goals when attending these sessions was to ensure that the challenges facing payroll departments were heard, and to advocate for the simplest possible solution to payday super. The current superannuation framework is complex, and the penalties for getting it wrong can be significant, so we need to ensure that a system moving to more regular payments can be achieved through the simplest means possible.
Some of the areas raised for discussion, which were debated in detail, include:
Defining Pay Day
What is pay day? It seems this would be a simple question to answer. Most would agree that it's the day employees normally expect to receive their pay, being the pay date on their payslip. That could be weekly, fortnightly or monthly (or the very occasional bi-monthly). But how will out of cycle payments be handled? Will these also be deemed to be a pay day for the purpose of pay day super? This could result in super being paid many times during a week if there are out of cycle pay runs.
Onboarding of new employees
Every payroll professional will have experienced the frustration of a new employee not making a super choice and therefore super stapling being applicable.
We asked the question; how can an employer pay super on pay day if you don't yet have the employees' super fund? Super stapling is constrained in that you can't request the employees' super fund details from the ATO until you have first submitted a pay event (that is, you have paid the employee their first pay). It's a backwards process that the ATO is aware of but hampered by privacy legislation. We do hope to see some concessions for new employees when it comes to the timing of their first super payment.
Late Payment of Super
Currently, if super is not paid in full by the relevant quarterly cut-off date, the employer is obligated to submit the (onerous) SG Charge Statement to the ATO. What will this look like under a payday super system? We debated whether an interest charge would still apply, and if so, from when? Would it apply from the employees' pay day, or will there be a grace period? Will the $20 administration fee still be relevant, and will the 'shortfall' still be calculated on salaries and wages rather than on Ordinary Time Earnings? What will the additional penalties and charges be, if any, for non-compliance? All these details need to be built into the new payday super model.
Super obligations of other parties
The key driver for payday super is to ensure that employees have the benefit of funds being received in their super accounts as soon as possible, setting them up for a successful retirement balance. This then is not just the responsibility of employers to pay super on time, but also on the other parties involved in the process such as clearing houses and super funds themselves.
There is a requirement for clearing houses to speed up their processing times, and for super funds to allocate funds efficiently, with file failures and un-allocated funds to be notified to the employer within a reasonable timeframe and with enough information provided so that employers can make an informed decision as to their next steps.
We are looking forward to seeing how the above challenges will be addressed when the model and draft legislation for payday is super is released, and to continue sharing our knowledge, concerns and recommendations to the working groups in the future.
