The Federal Government recently released an exposure draft of its ‘payday super’ bill – and it’s been met with mixed feelings from small-business owners and advocates.
The proposed ‘payday super’ change will require employers to pay superannuation to employees every pay cycle, instead of just quarterly.
If the bill passes, all employers – including small businesses – must pay super with every pay cycle from July 1, 2026.
When the proposal was first announced last year, it was met with concern from both SMEs and peak bodies. The fear was that more frequent super payments would stretch small-business resources – time and money already in short supply – even thinner.
On the other hand, the Federal Government says the move will benefit the retirement incomes of millions of Australians by helping deter unpaid superannuation.
“While most employers do the right thing, the Australian Taxation Office estimates $3.6 billion worth of super went unpaid in 2020–21,” said Treasurer Jim Chalmers in a statement last September.
What happens if you can’t pay super on payday?
Under the current proposed legislation, super contributions will need to arrive in employees’ super funds within seven calendar days of payment for an employee’s ordinary hours (“ordinary hours” does not include additional allowances, like bonuses or overtime).
If the super payment is not fully processed within the seven-day window, the employer will be penalised – and heavily at that. The exposure draft proposes a default amount of 60 per cent of the employee’s superannuation shortfall.
The Council of Small Business Organisations Australia (COSBOA) expressed concern around the seven-day timeframe, which it says is “unrealistic”.
“Super payments move through multiple banking and clearing house stages before reaching super funds,” said COSBOA Chair Matthew Addison. “At present, payments can take several business days to clear, and many transactions require additional time to reconcile.”
Moreover, the exposure draft states that if a super payment is rejected, it’s the employer’s responsibility to rectify and resubmit the payment within the original seven-day timeframe. As it stands, only about 1-2 per cent of super payments are rejected, requiring additional employer verification. However, more frequent super payments would also mean more frequent instances of rejected payments. According to COSBOA, the increase could create massive added administrative burdens for small businesses.
The peak body also criticised the fact that employers will be penalised for long processing times and super rejections in the first place – as both processes are largely out of their control.
“Super funds change their bank details, clearing houses have delays, and rejected payments may not be returned for months. Yet, under this law, employers will still face penalties,” Addison said. “That’s simply unfair.”
The payday super bill appears as part of a wider Government push to crackdown on unpaid employee entitlements. Earlier this year, deliberate underpayment of employees became a criminal offense.
Small Business Superannuation Clearing House to be closed
The Government’s announcement that it would close the Small Business Superannuation Clearing House – also from July 1 – received similar backlash. The clearing house is a free online service provided through the ATO that allows small-business owners to manage and pay superannuation contributions easily.
The ATO urged SME owners to consider alternative options such as commercial or super fund clearing houses or payroll software.
