Small business owner Tom Adam supports payday super, but says implementing it is putting a burden on small businesses. (Source: Supplied/ATO)
Australian businesses are being urged to start preparing for the introduction of payday superannuation now. A number of Aussie businesses are still unprepared for the landmark change, with new research showing more than half aren’t even aware it’s kicking in.
From July 1, employers will be required to pay employees’ superannuation at the same time as salary and wages. That means instead of the current quarterly super payments, businesses will have to pay the compulsory 12 per cent guarantee weekly, fortnightly or monthly, or face significant penalties.
Tom Adam, founder of Canberra Martial Arts and Fitness, told Yahoo Finance he supported the intent of payday super but was struggling with the implementation of it.
RELATED
“I’ve got three businesses myself. We employ 23 staff. I’ve got colleagues around me and I’m pretty tech savvy, and I’m struggling with it,” he said.
Adam said the main frustration for him was the lack of integration between systems and the administrative burden it would add. He currently does timesheets in one system, pay in another, and then superannuation in another, which he has to enter manually.
“I don’t think the ATO has done enough to help educate people on the best way forward and I don’t feel that the ATO understands how much angst this is going to cause small business owners, not from a financial side, just from the mental effort of doing it,” he said.
Do you have a story to share? Contact tamika.seeto@yahooinc.com
Adam questioned why the super system wasn’t connected with an employee’s tax file number through the ATO portal or integrated into the PAYG system to make the process simpler.
Currently super is paid by businesses to a clearing house and then to a super fund, with the ATO having regulatory oversight.
The ATO will be closing its small business superannuation clearing house from July 1, as part of the payday super reforms.
Businesses will have to switch to an alternative, with some existing payroll software already including super functions. Some large super funds also have online payment services, or there are commercial clearing houses.
New research by Employment Hero found 58 per cent of Aussie businesses and 80 per cent of employees were unaware of payday super, despite the government first announcing it more than two and a half years ago.
Story Continues
The change is intended to boost retirement balances of workers, who will benefit from more frequent and earlier super contributions. It will also make it easier for the ATO to detect and recover unpaid super.
The survey found 60 per cent of Aussie employers were concerned about their current super processes under payday super. Despite this, three-quarters believed they could adapt in the first six months.
About 70 per cent of businesses were worried about their ability to stay on top of evolving requirements, while 84 per cent already had frustrations with their current super processes.
Adam is the founder of Canberra Martial Arts & Fitness and President of the Phillip Business Community in Canberra. (Source: Supplied)
Employment Hero general manager of payments, superannuation and benefits Rob Dunn told Yahoo Finance superannuation processes were a “fairly fragmented system” historically, with some employers jumping between HR and payroll to collect data, super clearing house systems to enter the data, and their bank to process the money.
Cash flow is another issue, with the company’s modelling finding businesses would need an average of $124,000 in extra working capital to manage the shift from quarterly to per-pay-cycle contributions. About 40 per cent of businesses reported they may need to access credit or financing to meet the new requirements.
Dunn urged businesses to make sure they understood what cashflow and process changes were needed now.
“If you are still running any manual processes, can you look for new platforms, new systems that automate those?” he said
“If you’re running spreadsheets, or using the current ATO small business super clearing house, which is shutting down, you need to be really aware of what other platforms you can transition to.
“Start that sooner rather than later, because you don’t want to be looking into this change with manual systems or disparate systems. That’s what’s really going to hurt businesses, the admin overhead.”
Employers will have to pay super within seven business days of payday.
If they miss this deadline, they will be liable for an updated super guarantee charge, which will include the shortfall, daily interest and an extra enforcement charge of up to 60 per cent of the shortfall.
The ATO has confirmed it won’t penalise employees who are trying to do the right thing in the first year.
“Our compliance approach recognises that employers who try to do the right thing from 1 July 2026 to 30 June 2027 and resolve any issues quickly, should not be the focus of ATO compliance action,” it said.
Adam said he was confident he would meet the payday super deadline, but noted there was a lot of “anxiety” being felt by business owners.
“We don’t want to make mistakes because what happens when we do make a mistake is we get whipped really hard. The super section of the ATO, they are not forgiving at all,” he said.
Adam said he was already looking at his systems and expects many businesses will have to change the way they do things.
“The person who’s going to end up paying for this is the small business owners, because they end up covering the cost of compliance through their time, effort and money,” he said.
Get the latest Yahoo Finance news – follow us on Facebook, LinkedIn and Instagram.