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4 challenges of payday super and how to prepare

Published - 23 April 2024

While the change to payday super (proposed to commence 1 July 2026) will be felt strongly by employers who pay wages weekly or fortnightly, those who have high staff turnover and employ contract and shift-based workers could also face challenges.

Four challenges employers may face include:

  1. spending more time and money managing super obligations if payroll staff need to move off payroll systems to make super payments
  2. extra compliance risks with less time to fix data quality issues before the payments are due
  3. managing cashflow while making more frequent super payments
  4. onboarding new employees and getting their choice of fund before their first pay cycle.

Accelerated onboarding

Payday super is likely to require employers to speed up the onboarding process for new employees. To ensure super is paid where employees want it to, it may be necessary to provide default fund information and obtain choice of fund details earlier in the onboarding process. When it comes to checking an employee’s stapled fund, the ATO plans to introduce a more efficient process to meet the new requirements of payday super.

Increased compliance measures

The ATO continues to expand the use of Single Touch Payroll (STP) data to detect employers who miss SG payments.1 From 2026 onwards, the ATO plans to have the necessary digital infrastructure to identify instances of underpayment or non-payment of SG in near-real time.2 Employers need to ensure they understand the SG requirements and fulfil them.

These increased pressures could see employers consider if additional payroll staff are required and look to their payroll technology to improve efficiencies.

Payday super legislation is yet to be drafted and will need to address a number of concerns,3 such as detailed below.

The timing of payday

Payday captures every time a payment with an ‘ordinary time earnings’ (OTE) component is paid to an employee. Whilst the timing isn’t currently defined, two models are being considered. Either ‘employer payment,’ meaning the employer must pay SG on the same day as wages or salary, or a ‘due date’ model, meaning contributions must be received by super funds within a certain number of days from payday. Either way, employers will need to be much prompter in paying super.

Charges for late SG payment

Some changes to the ‘Super Guarantee Charge’ (SGC) are expected. This is an emerging area of concern as currently SG laws allow no tolerance for lateness. At present the SGC includes the SG owing, 10% interest p.a. that accrues from the start of the quarter and an admin fee per employee per quarter until paid (or later); none of which are deductible for an employer.

Maximum Superannuation Contribution Base

Currently, SG contributions can be limited in line with the ‘Maximum Superannuation Contribution Base’ which compares an employee’s earnings over the quarter with the cap. It’s unclear how payday super will interact with this, so watch this space if you currently apply this cap to any of your employees’ super.

Defined benefit funds

SG requirements for defined benefit account holders aren’t necessarily based on a payday contribution. How payday super legislation will address this group of employees is yet to be determined, so watch this space if you have employees in a defined benefit fund.

What can you do?

  • Ensure you understand the OTE components and SG requirements for all your staff (refer to the ATO, your accountant or auditor if uncertain).
  • Plan for your new super payment frequency.
  • Review your current onboarding and payroll processes.

ART’s partnership with Beam

Part of Australian Retirement Trust Group (ART), Beam is a complete super payment solution. It integrates with software providers to allow employers to pay superannuation contributions to their employees, directly from payroll. Ask your payroll provider if Beam is available. Some tailoring of the data may be required for Corporate or Business plans with ART and we will work with you and your payroll provider to explore it as a solution for you.

We’re here to help

ART has consulted with Treasury and the ATO over the last year and continues to do so as one of the largest stakeholders in the super industry. We are well placed to understand the upcoming changes and will bring you more information as it comes to hand. If you’d like to find out more about the requirements of payday super and the ways in which you can prepare, reach out to your Relationship Manager.

1. The Australian Government Australian Tax Office, ATO corporate plan 2022-23
2. The Australian Government the Treasury, Introducing payday super, Joint media release with The Hon Jim Chalmers MP, 2 May 2023
3. The Australian Government the Treasury, Securing Australians’ Superannuation Budget 2023-24 Consultation paper, October 2023