Hi everyone and welcome to Show Me The Perks, episode number 22. I’m Kim Bigg and today we are unpacking a topic that’s about to significantly change the way superannuation is managed in Australia. It’s referred to as Payday Super. Superannuation, as everyone would know, has been a critical part of Australia’s retirement system since around about 1993, as when it was first introduced. Payday Super aims to close the gap of the timing between when employees are paid and when the super actually hits their super fund. It also brings new responsibilities and processes for employers to consider.
To help us understand what payday super really means in practice, I’m joined by Sanja Hiziak, Associate Director in the Perks Accounting and Business Services Unit. Welcome, Sanja!
Sanja brings nearly 20 years of experience in accounting and business advisory and strategic planning across Adelaide and Sydney. ⁓ Sanja partners with a diverse portfolio of clients across allied health, professional services and not-for-profit organisations. Sanja supports clients at every stage of the business life cycle and is known for her practical mindset and strong work ethic. Let’s explore what Payday Super means now. I’ll throw across to Sanja for the first few questions.
Firstly, can you give us a bit of an indication for all of the listeners of what Payday Super is and why it’s being introduced and what problem Payday Super is trying to resolve? Sorry, there’s three questions there, but I’ll let you run into those as best you can.
Great, thanks, Kim. And hi, everyone, and those join in in listening. We’ve known about these changes for a little while, ATO announced them back on 2nd of May, 2023. And there were several reasons for it, Kim already sort of touched on them. But the main two were really to boost people’s retirement. I think the government, when they announced it, calculated that for an average person, an average 25-year-old medium income earner who was receiving their wage quarterly, receiving their wage fortnightly but super quarterly that they would be one and a half percent better off by retirement.
Correct. So not an insignificant amount by any means. And the other main reason was really just to make sure that employers were staying compliant and that they weren’t letting super sort of balances build up and remain unpaid because as we know, unpaid super has been a bit of an underlying problem in Australia. So they were just trying to address those. So the reform known as payday super comes into effect from 1st of July, 2026. And it requires all employers to make employee contributions of super within seven business days of payment date. Not process. Of paying their wage date.
Correct, correct. So that’s a very important distinction to make. So it’s not process date, it’s payment date. There is a little bit more leniency for first time ⁓ employees that join a firm. So employers actually have 20 days ⁓ and that is just to give them a little bit more time to process and get the administrative things correct. And so Payday Super has come in, in essence, what you’re saying is employers previously didn’t, we’re only required to pay people quarterly. And I think there’s an implied sense that the ATO is trying to fix partially they want people to be paid sooner because it’ll give them a better retirement balance when they eventually retire. But it’s also trying to prevent or at least have some early indicators of employers who let’s say decide not to pay people super if they are found not paying super earlier, then it gives it a better chance of minimising the damage, should we say. Exactly. So this podcast is mostly referencing things from the point of view of the businesses and the SMEs out there. From an employer’s perspective, how does payday super change their world? What does payday super, you know, what is the introduction of Payday Super mean for them and what businesses do you think it will impact the most?
So it’s fair to say it will impact everyone. It’s just, will impact them differently. Every employer that is correct. Yes, correct. ⁓ So every employer. So ⁓ with small businesses, ⁓ they will need to look at first of all, their software, whether they have software in place, they will be able to deal with these changes.
Many might not. So that is a really important thing for them to consider and get ready in time for. Also cash flow. Cash flow will be a really big thing for small businesses to manage, ⁓ including ⁓ revising their cash flow projections and budgets to make sure that they do have those reserves or lines of credit available to meet their obligations. ⁓
Small businesses also, a number of them may have been relying on the small business clearing houses, which was a free ATO service. And that’s due to also expire and be extinguished from 1st of July, 2026.
Shutting it down.
Correct. So they will need to explore other clearing houses. A number of industry super funds do have it as a free service as well, but that’s another factor for them to consider. And to clarify, there’s no carve outs for small employers or anything here, is there? This is just applied liberally across the board, whether you employ a million or hundreds of thousands of employees or whether you employ one employee, this is across the board, is it?
Correct. But obviously, with growing businesses or larger businesses, they probably have those softwares in place already. So they will be able to deal with these changes. So for them, it’s more…making sure that their payroll teams are across these changes if they’re not already, training them up, upskilling them, ⁓ and then also reviewing. So reviewing their payroll settings to make sure that the correct fields are being picked up, et cetera. Reviewing, for example, their contracts with contractors to see whether they might need to be included as well for super contributions. ⁓
Excellent. Just to sort of carry on from your point there, it’s an interesting issue when you look at large employers, you know, let’s say the size of perks, we’ve got 250 odd employees on our books. We, like anyone with 250 employees, have a very strong software that runs our entire payroll department. So for us, Payday Super, yes, it’s something we need to be aware of and adjust for, but ultimately we’re big enough that we have strong software to be able to support us. And there’d be other employers similar to us as well that have similar. In some ways, the Payday Super affects small employers more because they probably don’t have the existing software capability to be able to handle the payroll change, which is going from paying you super quarterly to paying super, potentially weekly or fortnightly depending on the pay cycle. So it is, I mean, I guess it’s an interesting point as much, I’m already asking you a question there, but it does seem to affect small employers proportionately more than large employers in terms of how it affects them. And the smaller businesses, it’s probably the moms and dads and they might be doing the payroll themselves as well.
Yeah. They’re to learn some new rules. Yeah.
One of the items that keeps getting brought up is the cash flow concern. you firstly explain, you know, when we say there’s a cash flow impact here, some people might sort of ask the question, how does that work? Surely, we’re paying the same amount of super, but super one way or the other. We’re not paying anyone any more than what they were before. But how do you explain how the cash flow can become a concern for businesses?
More to do with the timing of it. So obviously a number of employers were used to paying super quarterly. So it meant that, yeah, obviously they could be sitting, saving their money or spending on other things for a lot longer. Or if they had volatile sort of earnings coming, revenue coming in, sometimes it’s nice to pay quarterly.
Correct, just to give them that little bit of a buffer. Yeah, obviously with the changes with payday super, they’re now required to be making that either, like you said, weekly or fortnightly. It’s dependent on your payroll cycle. So yeah, I mean, to put it like an example, you know, for an employer, let’s say he had 12,000 of super contributions that they were paying quarterly. They’re now having to, if their payroll is fortnightly, they’re going to have to be paying 1,286, sorry, 1,846 every fortnight. ⁓ So it’s definitely obviously bringing it forward. And another big factor to also just flag is that there’s going to be quite a one-off squeeze come sort of July because…the normal June 2026 contributions are going to be due in July, but then also obviously these rules will come into effect. So you’ll be, yeah, they’ll be quite a big squeeze. So you’ll get to the first of July this year and if you’re paying them fortnightly, you’ll pay, you’ll have two lots of, you know, super go through in July. And then you’ll also have the one that’s supposed to go through on the 28th of July as well for the preceding quarter. So you’ll almost have four months going through in one. So there will be a bit of a bit of a cashflow squeeze. In a sense, it’ll be temporary, but it’ll be quite consistent. And people need to make sure they have sufficient cash to pay Super on the day, because the penalties can be quite harsh for not doing it.
Some of the things we’ve talked about is what it’s all about. How do employers, know, what should employers be thinking about? I mean, obviously, they need to think about how to pay people on time and the cashflow and things like that. But are there things within their payroll systems that need to change? Should they be thinking about changing to different software? What practical steps can they be thinking about in terms of minimising the disruption when it eventually takes force on 1st of July, 26th?
Yeah, no. So we’ve touched on some of this before, but yeah, it’s definitely looking at your software providers. Obviously, the likes of Xero and MYOB because of their scale and size, will be able to deal with these changes. They’re expecting them possibly not to have full functionality available by 1st of July, but definitely. they’ll be able to calculate and pay via They have an inbuilt clearinghouse inside as well. Correct. They’ll be able to make those changes and deal with those changes. For then other providers, it’s probably reaching out if smaller businesses again due to cost restraints they may want to consider other providers who will be able to just solve the payroll side of things. So doesn’t necessarily mean using it as an accounting software potentially. In terms of training, that’s going to be really key of the payroll staff or the people who will be handling it. So that’s really important. What if people don’t, you’re required to pay people’s wages on on the day and then pay their super, what if they don’t have their super fund details provided? Previously you had a long time to be able to go and locate it or at least a little while to go and locate it quarterly. Now it’s like you’ve got to find it straight away. So yeah, it is going to create a change to the way they run their payroll systems.
In terms of we really strongly ⁓ recommend to all employers to go live before, before first of July. So don’t wait till first of July.
Correct. Do your test runs that will, yeah, again, get checklists. There’s a lot of checklists already that are available online. But by all means, know, reach out to your Perks advisors as well. We’ll be more than happy to help guide you through that process and you do all your testing checks beforehand. So you’re ready to go and it’s a business as usual come 1st of July. Yeah, I think it’s a reasonable, like a reasonable plan is to say, look, I’ll go through to the end of the March quarter. We’ll pay a March quarter quarterly if that’s what we usually do. But really from, from April onwards, you almost should have your, your mindset being let’s just try out what it’s like to run our payroll and our superannuation payments on a payday super basis and get used to how it works, knowing that you’ve got a bit of extra time. If you don’t quite make it work straight away, your obligation isn’t in force until the 1st of July, 26. And iron out your adjustments. Certainly that’s been my recommendation to a few clients as well.
So just for the employers who are listening out there, what can go wrong? We’ve talked about all the reasons why Payday Super’s coming in and all the reasons why it’s coming in and all the different things you can do, how it’s going to affect everyone, what sort of software they should be thinking about and practically shifting to. Why do they need to do all of this stuff? What’s the risk if they don’t? What’s the penalty? Or what happens if they don’t comply with this new I mean, guess it is an administrative burden that’s being applied to everyone. Yeah.
So I’ll maybe take a step back and just start with currently what happens. So before Payday Super, if an employer doesn’t make a super contribution in time, they’re required to complete a super guaranteed charge form. There’s a $20 administrative fee that’s applied to that per employee per quarter and then there’s interest penalties on top of that. ⁓ that’s the current state of affairs.
And that SGC, the super company, if I can call that the administrative penalty and the interest is currently not tax deductible. Yep. From Payday Super onwards, so 1st of July, the uplift is going to be replaced by the flat administrative fee.
So that uplift is actually going to be a percentage of the SG shortfall and it could be up to 60%. And then it can be reduced by some factors like if there’s a recent compliance history or voluntary disclosure. And now the change in terms of the tax treatment is that the SG, the primary component is actually going to be tax deductible from 1st of July.
That’s the good bit. That is the good bit. But ⁓ the interest and the fee will continue not to be. The ATO has recently actually come out with its practical compliance guidelines. 2026 one has come out and outlined what the next 12 months will look like in terms of their compliance focus and they’ve given examples of low, medium and high risk employers and what that will mean. So your low risk employers will be employers who have tried to implement the software, are trying to pay it on time as they should, but then perhaps they’re a little bit late or there’s an error that’s detected with the software or with how they’ve processed something and they’ve come forward. Medium risk ones are then where… ⁓
they might have continued to pay quarterly from 1st of July, 2026, but then they tried to do the right thing and come on board and process it again how they should. And then the high risk employers are ones that are sort of- Don’t do anything? Yeah. Just keep doing what they’re already doing. Yeah, correct. And look, to be fair, the ATO said that there will be leniency obviously in first 12 months and then they will support employers with this change. Yeah, after that you’ll be a very harsh stance taken.
So for the businesses who are trying their best to comply and can show genuine evidence that they’ve made a genuine attempt to meet the obligations of Payday Super from 1st of July onwards, even if it doesn’t quite work for them, if they’ve shown that they’ve tried their best then the ATO will show some leniency, particularly in the first 12 months. But beyond the first 12 months, their expectation is that people comply and make sure they pay on time. And they’ve made some of the penalty imposition a bit, how do I say, a little bit easier to digest, but by no means have the penalties got smaller. They’ve probably got larger. It’s just a bit easier to administer the penalties if people don’t comply with the payday super requirements.
Very good. Okay. I think that’s a good summary. It’s probably my last question for you. If you can explain to the audience, what role the accountants and advisors should be playing to help businesses through the payday super changes.
So if you’re an employer sitting at home thinking, what should I talk to my accountant about or what should I expect from my accountant? What is it that you generally, we’re currently, we’re doing this today on the 13th of March today. ⁓ If you’re three and a half months out from when it’s due to start, what would you be thinking about now in terms of what your advisors would be helping you with?
Yeah, I mean it’d be ⁓ that you’re getting the information that you need as and when it’s announced by the ATO or your software providers. So your accountant plays a crucial role in that.
and that communication should sort of start and continue on over the next, you know, at least 12 plus months when it comes to payday super. It will be things like assisting with the rollout or ⁓ assessing the different software solutions. If that’s an avenue you need to go down, ⁓ we can definitely help with support and training of the payroll staff or whoever’s going to be dealing with the payroll. ⁓
We’ve got obviously an extension of Perks is our Perks People Solutions. So you might be now a timely ⁓ point to actually review award rates ⁓ if that applies to you. And they can assist with that just to make sure you pretty much you’ve got your ducks really in order. ⁓ Yeah. thing is reaching out. Isn’t it? mean, there’s a lot to it. It seems straightforward in a sense that, you know, yes, okay, we used to pay quarterly. Now we’ve got to pay you know, on the same day that we pay our employees, which in theory seems nice enough. I guess the theory then is there’s always a few little questions that come along and it’s nice for your advisor to be able to play their role and support you on that. I know there’s a few questions around how it works when someone’s maximising their super and then there’s a sort of a flop over this year where it’ll flop into next financial year and things like that. And I think there’s some carve outs from the ATO, but it’s important for people to, you know, really stop and think about how they do their payroll currently and what that will soon look like. I know in initial reviews I’ve done with some clients, it throws out some interesting scenarios that you don’t initially you think it’ll be easy. And then all of a sudden you think, hang on, that’s not as easy as I thought. ⁓ guess the role the accountants plays stepping up through this phase to support. ⁓
and support the employers out there to make sure they get it right. They know what’s happening from the first of July and they don’t anxious at the start of the new financial year. Or alone, really. Yeah, yeah. yeah. The other thing we just thought you might be really useful to think about as well would be audit shield as well. Obviously there’s gonna be a lot more compliance from the ATO when it comes to ⁓ super. So, you if you don’t have audit… ⁓
or the shield insurance I should say, ⁓ yeah, it might be now a timely point again to review that and consider it and speak to your advisor about it. Just to support you in the event that it doesn’t quite go to plan. Correct, correct. Yeah, fantastic. All right, is there any final points or items that you had in relation to Payday Super? Hopefully that’s a good summary for all the listeners. This was an important.
sort of episode in terms of topic to get out there so that people start to think about this payday super, it is coming quicker than we all think. And it’ll be here before we know it. And it’s important for people to raise any questions they might have sooner rather than later so that they can be supported and make sure they avoid any penalties imposed by the ATO for non-compliance. yeah. Excellent. Well, thank you for taking us through all that, Sanja. Fantastic work.
If there’s anyone out there who has any questions and things, I’m sure they can call their Perks advisor or send an email through to Show Me the Perks podcast. Thank you everyone for your time and we look forward to catching up with you next time.
