Compulsory ‘payday super’ to make Aussies better off in retirement
June 26, 2023
Millions of Australians will be better off in retirement thanks to superannuation reforms announced by the federal government.
The proposed payday super plan will require businesses to pay their employees’ superannuation on payday, rather than quarterly.
Coming into effect on July 1, 2026, the changes will reduce the risk of unpaid superannuation debts – an issue which costs Aussie workers billions of dollars each year.
More frequent payments also mean more time for investment earnings to compound, leading to better retirement outcomes. According to government analysis, a 25-year-old medium income earner whose super payments changed from quarterly to fortnightly would be about $6000 better off at retirement.
Easier for businesses
Under the new plan, it will be easier for businesses to manage their payrolls and reduce accounting liabilities.
Treasurer Jim Chalmers and Assistant Treasurer Stephen Jones said that while most employers do the right thing, the Australian Taxation Office (ATO) estimates $3.4 billion worth of super went unpaid in 2019–20.
“This simple change will strengthen Australia’s superannuation system and help deliver a more dignified retirement to more Australian workers,” they said in joint a statement.
“To further strengthen the system, the ATO will receive additional resourcing to help it detect unpaid super payments earlier and the government will set enhanced targets for the ATO for the recovery of payments.”
Businesses, super funds, and payroll providers have three years to prepare for the changes, with treasury and the ATO to consult with industry and stakeholders in the second half of this year.
Better for employees
The payday super changes will make it easier for employees to track payments and harder for disreputable employers to exploit them.
According to Industry Super Australia (ISA), about 2.5 million employees missed out on an estimated $4.3 billion in super in 2019–20.
Between the 2013–14 and 2019–20 financial years, ISA estimates $33 billion in super guarantees were underpaid.
“Too many people are missing out on the super they have earned and are entitled to,” Mr Chalmers and Mr Jones said.
“The change will particularly benefit those in lower paid, casual and insecure work who are more likely to miss out when super is paid less frequently.”
Compulsory payday super is part of a broader push by the Albanese Government to reform the superannuation system.
It follows the government’s decision to raise the tax rate on super accounts with a balance of more than $3 million – a measure which will only impact a small number of people but will generate about $2 billion in revenue in its first full year.
Those impacted will retain the current 15 per cent concessional tax rate on income from funds below the threshold and the current rate will remain unchanged for all superannuation accounts with balances below $3 million.
From 2025–26, the proportion of earnings attributable to balances over $3 million will attract an additional 15 per cent tax.
Speak to the superannuation experts
For advice on how the super reforms may impact your retirement plans, contact LDB group for superannuation advice.
Call (03) 9875 2900 or fill in the contact form below.