The bill was introduced to parliament earlier this month and seems likely to pass without much opposition.
However, there was a groundswell of pushback from industry bodies, including the SMSF Association and the Institute of Public Accountants, which called for a more “pragmatic and phased” approach to the law.
Peter Burgess, chief executive of the SMSFA, told SMSF Adviser the association is concerned about the timelines, particularly for small businesses that may not have the resources to adjust to the new requirements in such a short period of time.
“The payment of SG contributions is much more complicated than the payment of salaries and will require changes to systems and processes and changes to cashflow management to ensure sufficient funds are available each pay cycle to pay salaries as well as SG contributions,” he said.
“To provide more time for small businesses, we support a staged implementation process with small businesses granted a longer transition period to adjust.”
Burgess said employers may face difficulties paying SG contributions within the seven days to an SMSF in situations where the status of the fund has changed since the previous pay cycle.
“For example, where an SMSF annual return is two or more weeks overdue, the fund’s regulation details will be removed from Super Fund Lookup, which will then prevent SG contributions being received by the fund,” he said.
“In these scenarios, the solution in the legislation to allow a longer time period for the employer to pay the contribution to another fund should not, in our view, be the only solution. Employers should be given a longer period to pay the SG contributions to the nominated SMSF.”
Tony Greco, senior tax adviser for the IPA, said the government’s decision to press ahead without allowing more time or a staggered rollout ignores the practical realities faced by small businesses.
“We support the policy intent behind Payday Super. But the current timeframe, all-in on 1 July 2026, is simply challenging,” Greco said.
“Paying super is far more complex than paying wages, and anyone who refers to it as simple needs to look under the bonnet to understand the complexities. Payday super will also apply to certain contractors under the extended definition of employees for super guarantee purposes.”
He continued that small businesses are not opposed to reform, but they need sufficient time and support to adapt their payroll policies and systems, align with software updates, adjust their cashflow budgets and ensure super payments can flow smoothly through every layer of the system.
“The 270,000 current users of the free ATO’s clearing house, which are all small businesses, will also need time to transition to a commercial clearing house,” he said.
“The move from paying super guarantee quarterly to after each payroll event will impose a significant cashflow impost and additional administrative costs for small businesses as they transition.”
IPA has called on the government to instead opt for a phased implementation, under which larger employers would implement payday super first and allow small employers an extra year to transition.
“The government’s current approach risks creating compliance pressure and unfair penalties for employers who are doing their best to comply,” Greco said.
“Without appropriate timeframes and cost support, the burden on small businesses will be disproportionate, particularly for employers who currently pay their employees weekly.”
Daniel Butler, director of DBA Lawyers, said his firm is already fielding calls from concerned small businesses, and he hoped the government would listen to the concerns of relevant stakeholders as it did with the Division 296 tax.
“This is a disaster for small businesses because there are not adequate systems at work. I have clients showing me their stats, where they have the best software systems in the country, but it’s taken between five and 11 days for the money to arrive in the super fund. The government’s just setting up employers to fail,” Butler said.
“We have an aggressive government wanting to rush this in on a half-cocked, half-baked idea when the systems aren’t there. This is a massive change and to railroad businesses into a system that doesn’t just doesn’t work is totally unfair.”
Butler added that the PCG issued by the ATO would also not protect employers despite assurances from the Tax Office.
“Employers won’t be off the hook and to suggest that putting forward the PCG for the first 12 months, as a safety blanket, is ridiculous. There’s no legal protection under the PCG,” he said.
With regards to added work for employers, a few years ago, employers were required to give superannuation remittances, which is still a requisite and so it should be, however, why do so many employers still get away with not actually paying super across? Employees need to take some responsibility when long term lose of superannuation is kept by an employer because even after all the additional red tape, the employee did nothing to raise the issue sooner and its often then too late to get it paid. Apathy plays s role here.
But to pay super each pay cycle will, without doubt, add to further lose of productivity to employers.
Employers are tax collectors, GST collectors and superannuation collectors. Each added cycle is more work for zero gain, resulting in further lose of productivity.
I have been an employer until recently. STP was supposed to be “Single Touch Payroll” and it was nothing of the sort, but a convoluted mess, time and expense each week to the employer for less productivity – the usual outcome (same as businesses having to collect GST).
As it is, paying superannuation was a nightmare with understandably, constantly changing passwords and codes, systems down etc, etc. The ATO Super Clearing House was hopeless so I had to move on, but all have the same issues albeit to a lesser degree.
Running a business is constantly frustrated by more and more green and red tape and to what end. The bad guys still get away with it and the good guys get lumbered with more and more work for less and less productivity.
I certainly understand the importance to the owner of the super funds to have those funds as quickly as possible into their super account, at leas when markets are moving upwards!
Perhaps what the ATO could do is collect it themselves with the PAYG tax revenue. It doesn’t tick all of the boxes as some businesses are on quarterly BAS reporting. They are then best placed to jump on employers that abscond with peoples’ superannuation.
Its another nightmare on top of many that keeps getting added to by the powers that be.
You could always make the contribution yourself directly to the Fund, instead of pushing that responsibility onto the employer.
Same tax outcome either way, so why get someone else to do the work for you.
Employees personal contributions which are over and above the employer statutory contributions are being held by the employer for – in most cases 3 months (by increments)and then further 28 days before the employee recieves payment into their fund. Sometimes longer.
This in part contradicts the reason for individuals catering for their own retirement as the employer is holding onto funds that should be realising interest for the employee.
All businesses regardless of size need to get their “skates on” and start putting processes in place.
I support the payday super bill wholeheartedly. Why ?
Because employers are benefiting from my endeavours to have NO reliance on the Old Age Pension.