Employers are currently required to pay superannuation at least quarterly.
But on July 1, as PayDay Super comes into effect, employers must pay their employees superannuation on the day the employee is paid. If staff are paid weekly, fortnightly, or monthly, superannuation must be paid on the same day.
The government has done this because each year, employees miss out on significant retirement savings when businesses fall behind and may enter liquidation with massive superannuation debts. The idea is that non-compliance can be identified much earlier, and unpaid amounts are less likely to build up.
There is also a clear benefit for employees. When super is paid earlier, it reaches the super fund sooner and is invested sooner. The industry super funds’ return is about 10 per cent per annum, so about 2.5 per cent per quarter. If $200 is deposited at the start of a quarter, compared to the end of the quarter, that’s about $5 the employee would otherwise have missed out on. This would occur multiple times a quarter throughout a working life, and the interest compounds daily, so the outcome at retirement will be significant.
For business owners, this will require tighter cash flow management. My advice is to start role-playing the payday super scenario now. If there are system issues, cash flow gaps, or miscommunications, you will be more prepared to address them early.
And importantly, if you make a mistake and the super is paid late after July 1, it must be paid to the ATO, not simply sent to the super fund. Getting this wrong can lead to penalties that build quickly.