Key features of Payday super
Payday Super aims to streamline the SG process, ensuring employees receive their superannuation contributions more promptly. The government anticipates reducing the $3.4 billion gap between owed and paid superannuation by aligning SG payments with salary disbursements. This initiative is particularly beneficial for young workers; for instance, a 25-year-old median-income earner could see a 1.5% improvement in their retirement savings.
Benefits for employees
The transition to Payday Super presents clear advantages for employees. Immediate SG payments mean employees' retirement funds are bolstered sooner, allowing for greater compound growth over time. This change also provides more transparency and assurance that super contributions are handled appropriately.
Challenges for employers
While the benefits to employees are evident, employers must prepare for the logistical challenges posed by this shift. The primary concern is cash flow management. Employers must adjust their financial operations to accommodate the immediate disbursement of 12% of payroll on payday, a significant change from the quarterly system. Additionally, compliance costs may rise as businesses integrate this new requirement into their existing payroll systems.
Penalties for non-compliance
The government has outlined stringent penalties for non-compliance with the upcoming Payday Super requirements. Employers who fail to make timely SG payments will face punitive measures, including the super guarantee charge (SGC). This charge includes the outstanding SG shortfall, notional earnings, and an administrative uplift. Moreover, general interest charges and SG charge penalties add to the financial burden for late payments, emphasising the importance of compliance.
Looking ahead
It's crucial to note that Payday Super is not yet law. As discussions continue, the LEAD Advisory Group is committed to informing you about these developments. We are here to assist you in understanding and implementing these changes effectively, ensuring that your business remains compliant and well-prepared for the future.
