Employers will need to pay employee super at the same time as their wages from July 1. (Source: Getty)
The Australian Taxation Office (ATO) is urging Aussie employers to act now ahead of a “once in a generation change” to the way superannuation is paid. From July 1, employers will be required to pay super at the same time as wages.
That means employers will need to make the compulsory 12 per cent super payment weekly, fortnightly or monthly, as opposed to the current quarterly payments. The changes, which are now more than three years in the making, will impose penalties if payments are not received by super funds within seven days of payday.
ATO deputy commissioner Emma Rosenzweig said it was a “common myth” that you needed to wait until July 1 to start paying super on payday, but she encouraged employers not to wait until the last minute.
RELATED
“Take some time to understand the changes you may need managing your cash reserves, checking timings on super payments and making sure your software supports reporting,” she said.
“You don’t need to wait until 1 July to start paying super on payday. There are now up to 45 per cent of employers already paying their employees’ super more frequently than quarterly.”
Recent research by MLC found a whopping 80 per cent of Australians were unaware of payday super and 85 per cent didn’t know when the change would come into effect.
Fifty-five per cent of employers weren’t feeling confident that their business was ready to meet the requirements.
The reform is designed to tackle unpaid super, with the ATO estimating $6.25 million worth of super went unpaid in the most recent financial year data. Employees will also benefit from more frequent and earlier super contributions.
Do you have a story to share? Contact tamika.seeto@yahooinc.com
The ATO has also cleared up some other “common myths” surrounding payday super.
One is employers wrongly thinking they can just change the payday frequency of employees’ wages.
In reality, payment frequency will be set by the employment contract, awards or enterprise agreements.
“Payday Super changes when super must be paid, not the frequency employees are paid salary or wages. Super is paid as often as you pay employees – if you were paying weekly, then your super payments will be weekly too,” Rosenzweig said.
Payments will also only count when they are received by the employee’s super fund, not when they are submitted. That means employers will need to check processing times for their clearing house and super funds to ensure they can meet the deadline, along with checking with their payroll provider.
The ATO has recommended employers make super payments on payday to give them the most time possible.
“We know the majority of employers want to do the right thing when it comes to Payday Super. Employers who make an honest mistake and take steps to fix it quickly won’t be the focus of ATO compliance action in the first year,” Rosenzweig said.
The ATO will be closing its Small Business Superannuation Clearing House from July 1, so employers will need to transition away before then.
Employers won’t be able to access the online service after June 30, so they will need to download all transaction history before this.
Rosenzweig said the majority of employers using the clearing house already had super functionality in their current payroll software, so she encouraged employers to check this first.
Get the latest Yahoo Finance news – follow us on Facebook, LinkedIn and Instagram.