IPA senior tax advisor Tony Greco said Payday Super needs to come in a phased approach. (Source: IPA/Getty)
A major change to how Australians are paid their superannuation might be many months away, but concerns continue to be raised about how it could impact small businesses. Dubbed Payday Super, millions will get their 12 per cent contributions into their funds every pay cycle rather than every quarter.
The policy is set to be introduced on July 1 next year, but the Institute of Public Accountants (IPA) is calling for it to have a phased introduction for certain businesses. IPA Senior Tax Advisor, Tony Greco, said the change could leave many employers in the lurch.
“The current timeframe, all-in on 1 July, is simply challenging,” he said.
“Paying super is far more complex than paying wages, and anyone who refers to it as simple needs to look under the bonnet to understand the complexities.
“Payday Super will also apply to certain contractors under the extended definition of employees for super guarantee purposes.”
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He added that IPA and small businesses aren’t opposed to the concept of the policy, but it will just be such a monumental shift from the current system.
“They need sufficient time and support to adapt their payroll policies and systems, align with software updates, adjust their cashflow budgets and ensure super payments can flow smoothly through every layer of the system,” he said.
Under his phased approach, Greco felt larger companies should implement Payday Super first as they would be better suited to the potential financial implications.
Smaller employers, he added, should be allowed an extra year to transition.
The change is set to leave workers better off in retirement, with the average Aussie expected to gain $7,700 more in their super because the payments are coming in more regularly and benefitting from compound interest.
But under the quarterly system, employers have more financial breathing room.
Queensland cafe owner Daniel McGowan told Yahoo Finance he will have to be really on the ball when the changes take effect.
“I need to have that cashflow right here and now to put into the business to go straight into superannuation,” he said.
“I don’t think this is going to hurt staff in that they’re going to get less hours. But it is a consideration now, and I’ve spoken to them about it.”
Data from Employment Hero found 65 per cent of small to medium-sized businesses felt the new policy will have a “moderate” to “huge impact” on the day-to-day running of their businesses.
About a third said they would have to build up larger cash reserves to prepare for the change, while 15 per cent were not aware of the impending changes at all.
Queensland cafe owner Daniel McGowan said payday super will force him to be more on his game with cashflow. (Source: Supplied)
At the moment, employers have to ensure superannuation contributions land in staff funds at least every three months by the 28th.
They can pay it more regularly if they wish, but businesses have the option of doing it quarterly.
Under Payday Super, those 12 per cent contributions will have to arrive no later than seven days after a worker receives their salary.
Greco fears this change will hit small employers who are much more likely to pay staff on a weekly basis.
“The government’s current approach risks creating compliance pressure and unfair penalties for employers who are doing their best to comply,” he said.
“Without appropriate timeframes and cost support, the burden on small business will be disproportionate, particularly for employers who currently pay their employees on a weekly basis.”
While PayDay Super reforms have been on the cards for two years, the government only submitted the legislation for the change this month.
The move is designed to not only leave workers better off, but crack down on unpaid super.
More than three million Aussies missed out on certain super payments in 2022-23, which ended up costing them a collective $5.7 billion.
The government said that worked out to be $30,000 for everyone affected by the time they hit retirement.
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