Professional bodies and industry associations have highlighted potential issues with the proposed payday super regime and made recommendations to improve it in a recent submission to government.
The Financial Advice Association Australia (FAAA), along with accounting bodies, the SMSF Association, and The Tax Institute have called for the government to postpone the start date of the proposed payday super regime by at least 12 months, or ideally, 24 months.
The joint bodies said this would enable stakeholders to have sufficient time to comply.
“The proposed start date of 1 July 2026 for PDS is practically unworkable and should be deferred,” the submission read.
“The payment of employer SG contributions is significantly more complicated than the payment of salary and wages directly to an employee’s bank account with PAYG withholding. The complexity arises because the design of the superannuation contribution network involves various intermediaries such as clearing houses, gateways and superannuation funds.”
The submission outlined that the framework needs to be fully designed and legislated well in advance of the start date, with sufficient time to enable stakeholders to reasonably comply with their obligations and to ensure the new regime can be sensibly administered by the regulator.
The bodies have also called for a tiered implementation approach, which would enable the ATO to delay implementation of the regime for a range of employers.
Under this tiered approach, larger businesses would transition first, followed by smaller businesses. This would allow any issues to be addressed before smaller firms were required to comply.
The bodies have also said that the window of seven calendar days for SG contributions to be allocated to members’ superannuation accounts is too short.
“The Treasury should extend the window of seven calendar days for SG contributions to be processed and received by superannuation funds to 10 business days,” the submission read.
The bodies said the seven calendar-day requirement failed to account for potential delays caused by public holidays and the time necessary for clearing houses to process funds.
“Further refinement is necessary to address these issues effectively.”
CPA Australia superannuation lead Richard Webb said while the body supported the goals of payday super, the superannuation industry and small businesses were not ready for the change and the compliance obligations it brings.
“One of our main concerns is that the superannuation transmission network will not be ready to manage the increased traffic by July next year,” Webb said.
“We believe it is vital to postpone the start date for payday super by at least a year, ideally 24 months, to allow all stakeholders sufficient time to comply with the new logistical demands on the system.
Webb said the superannuation transmission network was fundamental to the successful delivery of payday super.
“If it is not adequately prepared for the transition, it would create a perfect storm of confusion and uncertainty for both employees and employers,” he said.
“The practicalities of delivering once-in-a-generation reform of the infrastructure underpinning the superannuation payments system are extremely challenging.”
CPA Australia warned that if the time frame is not extended, “a period of chaos could ensue as businesses try to fulfil their compliance obligations through a system that potentially can’t deliver”.
Webb also highlighted that small businesses would be particularly impacted by the change.
“The regime requires considerable upfront cash flow and system changes, posing difficulties for small businesses that may lack the resources and technological proficiency to adapt swiftly,” he said.
Simon Grant, CA ANZ group executive advocacy and international development, agreed that employers, payroll systems providers, super funds and other important stakeholders needed time to make the technology changes and improvements.
“That’s why we’re calling for a two-year delay to the implementation date to ensure we don’t see unintended consequences occur as a result of rushing these important reforms,” Grant said.
The Tax Institute’s head of tax and legal, Julie Abdalla, said payday super was a significant change to when and how employers pay their employees’ superannuation contributions.
“It needs to be carefully designed before it goes live, so everyone understands the new rules and employers know what they need to do to comply,” she said.
“More work is needed to get the settings right. It is unrealistic to expect everything will be ready by 1 July 2026.”
What a crock of hooey, pay your employees super the same day they get paid. Its an automatic transaction that employers should set up, just like tax. Pay it or get fined. Need more time to set up what?