PayDay Super reforms have been on the cards for two years. (Source: Getty\/Yahoo Finance) <\/p>\n
Australian workers are being warned about a potential “unintended consequence” of new superannuation laws set to come into effect next year. And for those taking advantage of the tax benefits of super, it’s something they will want to get ahead of.<\/p>\n
The Labor government’s new PayDay Super laws<\/a> have passed parliament and will come into effect from July 1, 2026. The change will mean employers will have to pay out workers their super at the same time as their salary and wages, rather than the current option of paying it after the quarter.<\/p>\n The tax benefits of superannuation are well known<\/a>, but workers tipping in extra from their salary to take full advantage of those benefits will be hit with a surprise tax bill next year if they’re not careful.<\/p>\n RELATED<\/p>\n Due to overlapping timing of the new scheme and the old system, workers who are maximising their contributions to boost their retirement savings and reduce their tax would be pushed over their annual concessional contributions cap of $30,000.<\/p>\n That will mean the ATO will hit them with an unwanted higher level of tax, eliminating any intended benefit.<\/p>\n Under the current laws, employers have 28 days after the end of the quarter to pay mandated super contributions. Not all employers choose to do it this way \u2013 and they are being encouraged to make the switch sooner rather than later<\/a> \u2013 but those who still do will make the payment for the April to June quarter in July, which is when the ATO will count it.<\/p>\n That would force a doubling up in the first quarter of the next financial year in 2026-2027, meaning as much as 15 months worth of contributions would be made in a single financial year, rather than the normal 12.<\/p>\n The chief executive of super industry lobby group the Association of Superannuation Funds of Australia, Mary Delahunty, said it will be something to watch out for.<\/p>\n “Because the ATO records contributions on the date of receipt into a member\u2019s fund, these members could receive more than 12 months\u2019 worth of concessional contributions in fiscal 2027 and hit the cap sooner than expected,” she told The Australian<\/a> in a report on Monday.<\/p>\n The quirk has prompted calls for a transitional period from tax authorities so people don’t get unwittingly stung when they’re trying to play by the rules.<\/p>\n “Any transitional relief would be a matter for the Australian Taxation Office and government. As always, it\u2019s prudent for anyone on a high wage, or closely monitoring their concessional contribution cap, to seek personal advice on managing their tax affairs,” Delahunty said.<\/p>\n While business owners will need to adapt and stay on top of their cashflow to comply with the new rules from next financial year, the industry has welcomed the changes for the benefits it will provide to everyday Aussies due to the compounding effects of receiving super sooner<\/a>.<\/p>\n The move is also designed to help tackle unpaid super<\/a>, which the Super Members Council found cost 3.3 million Aussies $5.7 billion in super payments in the 2022-23 financial year. That\u2019s an average of $1,730 each a year, which can add up to a loss of $30,000 in retirement<\/a>.<\/p>\n Making extra superannuation contributions can help lower your taxable income<\/a> and top up your retirement savings<\/a>.<\/p>\n For example, Vanguard found that a 30-year-old earning $80,000 who made a $1,000 voluntary super contribution and claimed a deduction would receive a refund of $320 when they lodged their return.<\/p>\n After accounting for the 15 per cent contribution tax, $850 would be added to their superannuation<\/a>.<\/p>\n If they were able to make this $1,000 contribution every year for 15 years, it could increase their super balance by $79,856 by the time they reach retirement age at 67.<\/p>\n Super contributions are taxed at a favourable rate of 15 per cent, so the strategy may suit people who have higher marginal tax rates<\/a> than this.<\/p>\n Get the latest Yahoo Finance news – follow us on Facebook<\/a>, LinkedIn<\/a> and Instagram<\/a>. <\/p>\n The new laws have been touted as a quiet boon for workers. (Source: Getty) <\/p>\n