Some businesses will need to rethink their cashflow to meet incoming payday superannuation reforms, the Australian Taxation Office (ATO) says, as it launches a checklist designed to guide employers through a generational change to the superannuation system.
Related Article Block Placeholder
Article ID: 327686
From July 1, employers must pay their workers’ superannuation guarantee payments at the same time they process regular salary and wages.
That alignment will replace the current system, which allows many employers to make superannuation guarantee contributions on behalf of staff on a quarterly basis.
Payday superannuation reforms have been a long time coming, with the Albanese government announcing its plan in 2023.
But with precious little time remaining before July 1, the tax office is doing what it can to inform employers of the practical steps they can take to avoid a rocky transition.
Smarter business news. Straight to your inbox.
For startup founders, small businesses and leaders. Build sharper instincts and better strategy by learning from Australia’s smartest business minds. Sign up for free.
By continuing, you agree to our Terms & Conditions and Privacy Policy.
Speaking to SmartCompany, ATO deputy commissioner Emma Rosenzweig said moving from a quarterly super guarantee payment cycle could require businesses with lumpy cashflow to make adjustments.
“We know that payday super will mean that some businesses do need to change the way they manage their cashflow, and think about their cashflow, so that they’re prepared,” she said.
“But the aim of that is to ensure that their staff receive the retirement savings that they’re entitled to, in the same way that a business needs to consider having enough cash flow to meet their staff salary and wages.”
Around 40% of businesses already pay super guarantee more regularly than quarterly, said Rosenzweig, who painted more frequent contributions as a long-term positive for businesses.
“We do know that smaller, more frequent payments really do reduce the risk of building up a large quarterly liability that a business then struggles to meet,” she said.
Checklist calls for calm and collected preparation
Contemplating cashflow is one of several key points on the ATO’s new checklist, which it hopes will guide employers in the months ahead.
Starting now, small businesses should delve into what the payday superannuation reforms mean and how they will be affected, says the checklist.
Online ATO resources and videos are available to help employers understand the changes.
Related Article Block Placeholder
Article ID: 326371
Between February and March, employers should pick a date to start making payday superannuation payments.
Businesses should discuss plans with a tax professional to ensure the timing works and to iron out plans past July 1.
The first few months of the year are also a prime time to assess if business cash flow, payroll governance, and fund details are primed for the changeover.
Additionally, employers should also review and correct error messages received from super funds, ensuring contributions are processed correctly and on time.
Rosenzweig said the ATO is working closely with superannuation funds and payroll software platforms to ensure error messaging is fast and accurate, helping small businesses solve payment problems before they snowball into major liabilities.
“Having better error messaging, and the requirements of faster error messaging in the whole system, is a really key part of what we, and the funds, and the software providers are building,” she said.
Across April and June, employers should triple-check their payroll software systems. Superannuation clearing house users should make sure their details are up to date.
Any lingering Small Business Superannuation Clearing House users will need to transition away from the system, which will become obsolete from July 1.
Related Article Block Placeholder
Article ID: 324836
Superannuation guarantee obligations for the March quarter must be paid by April 28, with the final June quarterly payment due by July 28.
The full checklist is available here.
Compliance approach to consider third-party failures
Acknowledging the significance of the reforms, Rosenzweig confirmed the ATO will not level its harshest compliance actions against late payers who genuinely try to do the right thing past July 1.
That includes employers who make late payments for reasons outside of their control, be it an error with their payroll software provider or the relevant super funds themselves.
If a business does make a late payment for one of those reasons, “we will reflect that in the way that we work with them,” she said.
Even so, Rosenzweig called on employers to do what they can today to prepare for the momentous change.
“Don’t leave it to the last minute to be ready,” she said.
