Payday Super – Consultation crucial to avoid an administrative and penalty minefield
25/10/2023
Increased administration and difficult deadlines will be a strong focus of employer and stakeholder concerns as consultation opens on Treasury’s broad design plans for Payday Super.
As part of the 2023-24 Budget, the Federal Government announced that from 1 July 2026, super must be paid on payday, a change that will contribute towards a ‘dignified retirement for all Australians’.
Treasury has released the Securing Australians’ Superannuation consultation paper (the Paper), which will remain open until November 3, 2023. The Paper provides a number of areas for consultation, including in relation to:
- defining payday super
- updating the superannuation guarantee (SG) charge
- compliance mechanisms
- choice of fund and employee onboarding
It is intended that stakeholder answers will help inform the design of payday super implementation and compliance frameworks.
SW fully supports the intended purpose of the payday super to address the drivers of unpaid SG. Material change is required to systems and processes in employers, clearing houses, superannuation funds and the ATO to deal with increased frequency of contributions (up to 13 times) and tighter deadlines.
Treasury’s openness to considering a broad spectrum of issues is commendable, with few topics being excluded. If not designed well, there are also numerous aspects of the proposed design which may unduly increase the administrative and regulatory burden on employers.
SW is preparing a submission to Treasury addressing practical issues for Australian businesses in designing and implementing the payday super frameworks. While there are many matters that deserve consideration, we highlight several key consultation topics below and welcome your insights and feedback:
- the transition from self-assessment system for SG obligations to ATO-driven recalculations and assessments.
Employers who have conducted recalculations of pay and super will know that recalculations are rife with false discrepancies. It is proposed that under Payday Super, the ATO will recalculate superannuation obligations based on STP and superannuation fund reporting data. The ATO calculated superannuation shortfalls will result in “nudges” for employers to comply followed by assessments, moving away from the self-assessment system we currently have.
Is it possible for the ATO to eliminate assessments resulting from false discrepancies, and if so, how might this be done?
- due date for the making of superannuation contributions or receipt by the superannuation fund.
Treasury has suggested either deadline based on when payment is made, or one based on receipt by the superannuation fund.
Superannuation is often a subsequent process to finalisation of a pay run, and can involve significant manual intervention (e.g. in successfully producing and submitting the SAFF file).
Is a same day due date for payment or a three day deadline for payment into the superannuation fund realistic? If not, how long would employers need to complete processing and comply with deadlines?
- grace periods for employers to deal with payroll/Payday Super issues that will occur on a more frequent basis (from quarterly to payroll cycle).
There are many circumstances that arise which can cause superannuation shortfalls, some of which outside the employers control. For example, incorrect superannuation fund details, or paid amounts being reclassified (e.g. an employee incorrectly claims overtime that is re-classified to ordinary pay).
While proposed improvements in onboarding and superannuation stapling may reduce these instances, the increased frequency and tighter deadlines may result in more SG shortfalls.
Currently, employers have the quarter and 28 days to correct issues that arise.
Should there be a grace period which allows employers to correct shortfalls of superannuation? If so, what should be included as a concession in the grace period (interest, admin fees, income tax deductibility, SG calculations)?
In addition, should the SGC calculation be made easier to assist with the administrative burden of compliance?
How SW can help
While this has not been made law as of yet, we see a trend of increased transparency and compliance activity from the ATO in respect of superannuation compliance. In anticipation of these trends, or the proposed Payday Super changes, all employers should review the configuration of STP phase two reporting to the ATO as well as end -to -end superannuation processing to reduce the risk of superannuation shortfalls and review activity from the ATO or FWO.
SW has designed an end to end offering which includes a review of time and attendance / payroll system configuration, and the use of advanced data analytics to test superannuation compliance and reporting to superannuation funds and the ATO.
If you have any concerns with the proposed reforms or are interested to contribute to SW’s submission, please contact Paul Hum.
