Payday Super ahead: are you ready?

From 1 July, all employers, including small businesses, will need to pay their employees’ super contributions at the same time as their salary or wages. Employers who don’t meet these new obligations could face financial penalties from the Australian Taxation Office (ATO).

The aim is to help Australians save more for retirement. Government research suggests that, under the new rules, a worker currently receiving their super quarterly and wages fortnightly could be around 1.5% better off at retirement. In addition, more frequent super payments will make it easier for employees to keep track of their super.

If you’re already paying super each pay cycle, you’re one step ahead. But if, like 60% of Australian employers, you are still paying super quarterly, you’ll likely need to make some changes – including reviewing your systems and ensuring you have the cash flow to meet more frequent payments – whether you pay employees weekly, fortnightly or monthly.

Let’s look at what the changes will mean for businesses in more detail.

The new Payday Super rules

From the start of the new financial year, you’ll need to pay your employees’ Super Guarantee (SG) contributions at the same time as wages, and ensure their super fund receives the payment within 7 business days of payroll. There are a few limited exceptions – for example, when onboarding a new employee, you have up to 14 business days to make that first payment.

The obligation to pay employees faster doesn’t rest solely with employers. Super funds will also need to move faster, depositing contributions into your employees’ accounts or returning contributions within 3 business days – down from the current 20.

The good news is it should be easier to monitor your super obligations and finalise super contributions for departing employees.

What else is changing?

Calculating and reporting

The way you calculate and report super is also changing. You’ll now use Qualifying Earnings (QE), which includes Ordinary Time Earnings (OTE), plus other regular payments like commissions and salary sacrifice. You can find out more about how to calculate QE here.

The ATO Clearing House is closing on 1 July

If you relied on the Small Business Superannuation Clearing House (SBSCH), you’ll need to transition to another payment solution. If you’re already using payroll or accounting software, it’s worth checking as it may already include options to manage and pay your employee super. Learn more about your options.

Managing the impact on your business

Review your systems and payment processes

Reviewing your payroll processes early can help you understand how the changes may affect your business. This includes ensuring  employee data is up to date, checking how your systems will manage payment of super on payday and checking what payment method you’re using. While fast payment options using Australia’s New Payments Platform (NPP) – like Osko, PAYID, PayTo or NPP Bulk – aren’t mandatory for Payday Super,  they can help speed up payments and reduce the risk of non-compliance. Learn more about fast payments here.

Consider payroll software

A solution like Xero can automatically calculate the super you need to pay each pay cycle, saving time and reducing errors. NAB customers can also take advantage of our partnership with Xero to access the software free for your first  6 months and receive a $300 gift card.¹ Beyond helping you meet your Payday Super obligations, Xero also enables your bank transaction data to automatically feed into your accounting package.

Get your cash flow ready

If you’re currently paying super quarterly, it’s important to consider the potential impact on your cash flow. You may consider updating your cash flow forecasts to take into account more frequent payments, which could help you stay ahead. You might also consider using multiple transaction accounts, like our $0 monthly fee NAB Business Everyday account, to set aside enough to cover each pay cycle. That way you know the money is there when you need it.

Questions about Payday Super?

The Australian Taxation Office offers guidance on everything from calculating QE to understanding the new penalty framework. Visit the ATO Payday Super website.

Early preparation is key

Introducing Payday Super may feel like a big change for your business, but with a bit of forward planning, it’s entirely manageable. The main thing is to get organised early by reviewing your systems, updating your cash flow forecasts, and start transitioning ahead of the mandatory deadline.

By preparing now, you’ll make the move smoother for your business, and you’ll steer clear of last-minute headaches or possible penalties.

If you’re keen for more details, be sure to check out our Payday Super webinar.