Payday super laws could unfairly penalise employers

According to accounting and tax body BDO, proposed payday superannuation laws could penalise employers for payment processing times outside of their control.

The legislation would require employers to pay their workers’ super alongside every paycheck, instead of quarterly. Super payments would need to be processed into employees’ accounts within seven days of payday.

This means employers could be penalised for processing delays that occur on the super fund’s end, BDO tax executive Judy White warned.

“The employer can make the superannuation contributions immediately after pay day, however still end up with a superannuation guarantee charge liability,” White explained.

“This will occur if the payment takes more than 7 days to be ultimately processed in the employee’s super fund, arising from no fault by the employer.”

The law is designed to crack down on unpaid super, according to Stephen Jones, minister for financial services.

More frequent super contributions would allow employees’ super balances to compound faster, boosting the value of their investments. It would also enable businesses to manage their cash flow more smoothly by spreading out large quarterly super expenses.

“While most employers do the right thing, the Australian Taxation Office estimates $5.2 billion worth of super went unpaid in 2021–22.” Jones said in a release.

“Payday super will make it easier for employers to manage their payroll by paying super at the same time as salary and wages. The new law will also streamline the way super is paid by employers to make it easier to meet their obligations.”

However, White noted that the new law would see employers that pay their workers weekly paying super 52 times a year rather than 4 times a year, potentially imposing outsized burdens on such firms.

The seven-day processing requirement is also based on calendar days, not business days, narrowing the window for employers to avoid penalties according to White.

Regardless, she praised the legislation’s design to penalise repeat offenders, but give leeway to employers who have made a one-off mistake.

Under the new legislation, the penalty would be 25 per cent of the super guarantee charge for first-time offenders, and 50 per cent for those who had previously been penalised over the past 24 months.

“Employers will also be prompted to rectify unpaid super quickly and face increasing penalties for longer, larger and repeated failures,” Jones said regarding the new legislation.

The super guarantee charge will also be tax deductible, a change that White said would be well-received by businesses. Penalties would remain non deductible.

With payday super laws set to take effect in 15 months, uncertainty still surrounds the legislation, according to White. This is compounded by the looming election. Regardless, employers will need to stay informed and have a response plan ready to adapt to the changes.