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Payday super: a ‘win for workers’ but ‘burden’ for small business

Super

The government’s move to make wages and super payable simultaneously prompts mixed reactions from stakeholders.

By Philip King 10 minute read

Payday super is a win for workers but a burden for small business say stakeholders in mixed reactions to the Labor government’s move to make super guarantee payments occur simultaneously with salary and wages.

Treasurer Jim Chalmers said the change to “payday super” was simple and would strengthen the superannuation system.

“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 Treasurer said.

“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.”

Mr Chalmers said the timing of the change, from 1 July 2026, meant employers had room to adjust.

“The 1 July 2026 start date will provide employers, superannuation funds, payroll providers and other parts of the superannuation system with sufficient time to prepare for the change,” he said.

However, small business body COSBOA said the proposal ignored the complexities of making super payments and would fail to address existing problems.

“Employers face costs to comply with the compulsory superannuation payment systems, including software, transaction fees and time spent processing payments and addressing errors,” chair of COSBOA Matthew Addison said.

“Payday super increases transaction costs, particularly for weekly payroll.

The government-provided Small Business Superannuation Clearing house, used by around 130,000 small employers, is ill-equipped to handle payday super. It cannot process multiple payments in quick succession and has a history of delays.”

“The vast majority of employers already pay super regularly and on time, often correcting shortfalls without external input. The proposed changes penalise compliant employers and may discourage non-compliant employers from correcting their errors and making timely payments.”

The IFPA’s head of superannuation Natasha Panagis acknowledged it could cause cash flow problems for smaller businesses, which would need to find ways to pay super more frequently.

But she said it was a big win for workers.

“The change will allow more workers to be better off in retirement due to the power of compounding interest,” she said. “Having superannuation guarantee contributions paid at the same time as salary/wages and therefore more frequently than the current quarterly SG regime will allow many Australians to grow their retirement savings faster and be better off in retirement.”

Australian Institute of Superannuation Trustees CEO Eva Scheerlinck said the measure was overdue and the burden on business was overstated.

“We know the majority of employers do the right thing but some do not and, given superannuation is deferred wages, it makes sense that it be paid at the same time as salary and wages,” Ms Scheerlinck said.

“Historically, there has been an argument that paying more frequently than quarterly would be a burden on employers.

“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.”

Super Australia chief executive Bernie Dean commended the government for doing “the right thing” by workers.

“This is a big win for the 3 million mostly young and lower paid Australians unfairly deprived the super they’ve earned,” he said. “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.”

Mr Chalmers said the move would help employees spot unpaid entitlements and the ATO would get additional funding to police the system more effectively.

“Payday super will also make it easier for employees to keep track of their payments, and harder for them to be exploited by disreputable employers,” he said.

The government would set tighter targets for payment recovery after the ATO estimated $3.4 billion worth of super went unpaid in 2019–20.

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Philip King

Philip King

AUTHOR

Philip King is editor of Accountants Daily and SMSF Adviser, the leading sources of news, insight, and educational content for professionals in the accounting and SMSF sectors.

Philip joined the titles in March 2022 and brings extensive experience from a variety of roles at The Australian national broadsheet daily, most recently as motoring editor. His background also takes in spells on diverse consumer and trade magazines.

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