Millions of Australians are set to benefit from a major change to the country’s superannuation system.
Employers will soon be required to pay a worker’s super contributions at the same time as their salary or wage, starting from July 1, 2026.
This means more people will have higher savings at retirement age as they will receive their contributions earlier and more frequently from their employers.
The proposed legislation, which is now open for consultation, will also work to reduce the amount of unpaid super owed to workers which the Australian Taxation Office estimates is billions.
The change to payday super was announced earlier this year in May as part of the federal government’s 2023-2024 budget.
However, the reform is now one step closer with the release of the government’s Securing Australians’ Superannuation consultation paper on Monday which allows industries and stakeholders to give their input on the proposed laws.
A joint statement from Treasurer Jim Chalmers and Assistant Treasurer Stephen Jones said the change would strengthen Australia’s superannuation system and “deliver a more dignified retirement” to more workers.
The move will also improve the ATO’s ability to find and recover unpaid super payments.
“While most employers do the right thing, the Australian Taxation Office (ATO) estimates that employees were owed $3.4 billion worth of super in 2019–20,” the statement on Monday said.
The Treasury estimates about 8.9 million people will be better off at retirement from receiving their super contributions earlier and more often during their working life.
“By switching to payday super, a 25-year-old median income earner currently receiving their super quarterly and wages fortnightly could be around
The government will also seek feedback on how an employee’s choice of fund could be improved under payday super.
It is compulsory for employers to pay workers the superannuation guarantee, which is currently 11 per cent of an employee’s ordinary time earnings.
At the moment, employers must pay workers the superannuation guarantee at least four times a year by the quarterly cut-off dates.
Failure to do so can result in fines or charges to the ATO.
$6,000 or 1.5 per cent better off at retirement,” the statement said.
“More frequent super payments will also make employers’ payroll management smoother with fewer liabilities building up on their books.”
The Treasury’s consultation paper states that due to the current framework of the superannuation guarantee system, “many obligations remain unpaid for extended periods of time”.
“This causes significant issues when employers enter liquidation without having paid their SG obligations,” the document read.
“Further, the ATO has noted that businesses often enter liquidation or bankruptcy before the underpayment is identified, limiting its ability to conduct effective compliance activities and recover unpaid superannuation.”
The proposed legislation is planned to go ahead in 2024 after the consultation period, which will run from October 9 to November 3.
(SKY NEWS)
