Businesses will need to prepare ahead to address impacts on their operations such as payroll system updates and changes to cashflow.
What is Pay Day Super?
Employers are currently required to transfer superannuation payments for employees and other eligible workers every quarter, regardless of when they are required to pay employee wages and entitlements. This creates a disconnect between payment of wages and superannuation contributions and allows the business to hold this money for longer.
Under Pay Day Super, the employer must pay employees’ super contributions into their superannuation fund at the same time as they pay their wages.
Why is Pay Day Super coming in?
While most businesses are making correct super payments, the changes are being introduced to address the few that do not. In these circumstances, it is not only the employees who miss out. Businesses doing the right thing must compete on an uneven playing field and are undercut by business doing the wrong thing.
What do employers need to do?
The first impact will be on cashflow. Rather than holding off paying super entitlements until the end of the quarter, you must have that money on hand at the same time you pay an employee.
Secondly, your payroll systems, accounting software and procedures will need to be reviewed and likely updated. If you use an accountant, bookkeeper, or financial adviser, discuss the changes with them as soon as possible.
Small businesses should also be aware of the planned closure of ATO’s free Small Business Superannuation Clearing House which will coincide with the introduction of Pay Day Super. Businesses currently using this service will need to make alternative arrangements in advance.
Don’t procrastinate – stiff penalties apply for incorrect payments. This could be up to 60% of the shortfall, plus daily interest charges, if payment is not received by the employee’s super fund within seven business days of the employee’s pay day.
What is HIA doing?
HIA is urging the government to delay the introduction or provide a longer transitional period for small-to-medium sized businesses. This is critical to ensure businesses are aware of the changes and can adjust their cashflow, revise procedures and arrange for software to be updated.
We will continue to keep members informed and will provide additional resources closer to the commencement date.