Payday super raises processing costs for all parties involved. Are the Superannuation funds able to cope with up to 12-fold increase in transaction volume without incurring extra cost? Employee super balances could decrease due to higher administration fees. Employers will be paying more for their payroll software and subject to the super gateway utilised also paying more for each transaction. Payroll software have different commercial offerings but someone is paying to process the super.

Superannuation Guarantee Contribution laws, established in 1992, were designed for a time when paper cheques and remittance advices sent through the mail was the only payment system.

Leap forward to 2023, all the obligation remains upon the employer, but they must, by law, use processes out of their control. They send an electronic payment and a payment contribution message from their payroll software through a Superannuation Clearing House. The clearing house then passes the data and the payment to each employee’s superfund. The superfund then must process and allocate the money to the employee’s super account. The employer is relying on their software, their bank, the clearing house and the superfund itself to process everything in the required time.

Currently, employers recheck and verify payroll calculations and ensure superannuation calculations are correct once per quarter and payment made within 28 days. To be efficient and effective employers are acquiring commercially provided software to calculate the employees gross pay, the tax to be withheld, the leave accruals and entitlements as well as the amount of superannuation to be paid.

The current penalty regime is imposed upon an employer if one of the parts of getting that payment in to the employees super account fails. Penalties include loss of the tax deductibility, $20 per month administration fees, interest rates, up to 200% penalty amounts. While we concur that deliberate or repeated underpayment of superannuation should be penalised, this penalty regime designed in 1992 is no longer fit for purpose or targeted correctly.

Payroll corrections happen. Payday super raises a number of concerns about process and efficiency. Payments can change with public holidays, allowances, loadings, and deductions, or when overtime is reported after a payrun is complete. If super is to be paid on payday, questions arise about handling corrections and overpayments.

· what happens when an employees pay is corrected and super has been overpaid?

· what happens when the difference in super is $0.50 and a correction incurs transaction fees in excess of the corrected amount?

Employers face costs to comply with the compulsory superannuation payment systems, including software, transaction fees, and time spent processing payments and addressing errors. Payday super increases transaction costs, particularly for weekly payroll.

The government-provided Small Business Superannuation Clearing house (SBSCH), used by around 130,000 small employers, is ill-equipped to handle payday super. It cannot process multiple payments in quick succession and has a history of delays, with reports of payments through the SBSCH taking months to be received by super funds. A significant overhaul is needed to accommodate the proposed more frequent super payments.

The vast majority of employers already pay super regularly and ontime, often correcting shortfalls without external input. The proposed changes penalise compliant employers and may discourage noncompliant employers from correcting their errors and making timely payments.

The proposal to move employers to compulsory payment of super on payday requires careful and considered design. It must allow a corrections framework whereby errors can be found, fixed and any shortfall paid once per quarter (aligned with BAS reconciliation and verification processes). This proposal requires consideration of the cost to business, balanced with the benefit to the employees superannuation growth.

It is claimed by some that the move to payday super helps with cashflow. Most small business have complied with the obligation to pay their super since 1992 and for cashflow plan their super payments in line with all their payment obligations. Paying their tax office tax amounts, their GST, their PAYG withholding, paying their employees wages and entitlements, paying their suppliers and hopefully making a living for themselves aswell. Small business cashflow is managed and planned. Super has been expected quarterly and small business plan to pay it quarterly. Fortunately the Government announcement allows a transition time for business to move towards shifting quarterly payments to a more regular cycle. If super is being paid each week it means another bill is not being paid that week, someone else’s payment will be paid later. The announced transition time frame mitigates the damage to payment times for others.

It is claimed by some that it is the employee’s money and the employer should not be holding it. As mentioned above, small business in particular doesn’t work or think that way. The business knows it has a myriad of obligations and bills to pay. They plan to pay their bills as required. Superannuation contributions were added as an expense to the employer, an added cost of employing people and the rate steadily increased. It is not that the money has been withheld from the employee, it is that the employer has an obligation to pay money on top of wages to the benefit of employees.

Superannuation Guarantee laws need reform to reflect modern systems and place fault and penalties on actual offenders. Consultation and co-design with small businesses are essential for creating a workable system that doesn’t increase employer costs, disadvantage employee super balances, or punish compliant employers due to the actions of a few.

On behalf of small business COSBOA calls for consultation and co-design for a workable system, with a focus on:

– No increased processing costs for employers

– No increased costs for clearing houses or super funds that disadvantage employee balances

– Avoiding punishing compliant employers due to others’ misbehavior

– Implementing an acceptable corrections framework

– Reforming Superannuation Guarantee laws to reflect modern systems and target offenders.

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From 1 July 2026, employers will be required to pay their employees’ super at the same time as their salary and wages.

This simple change will strengthen Australia’s superannuation system and help deliver a more dignified retirement to more Australian workers.

By switching to payday super, a 25-year-old median income earner currently receiving their super quarterly and wages fortnightly could be around $6,000 or 1.5 per cent better off at retirement.

More frequent super payments will make employers’ payroll management smoother with fewer liabilities building up on their books.

Payday super will also make it easier for employees to keep track of their payments, and harder for them to be exploited by disreputable employers.

The change will particularly benefit those in lower paid, casual and insecure work who are more likely to miss out when super is paid less frequently. Women are overrepresented in this group.

While most employers do the right thing, the Australian Taxation Office (ATO) estimates $3.4 billion worth of super went unpaid in 2019–20.

To further strengthen the system, the ATO will receive additional resourcing to help it detect unpaid super payments earlier and the Government will set enhanced targets for the ATO for the recovery of payments.

Treasury and the ATO will consult closely with industry and stakeholders on these changes in the second half of this year.

The 1 July 2026 start date will provide employers, superannuation funds, payroll providers and other parts of the superannuation system with sufficient time to prepare for the change.

The Albanese Government is committed to strengthening the superannuation system so that it is equitable, sustainable and delivers better outcomes for all Australians.

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The reform – which will not come in until July 1 2026 – will benefit the retirement incomes of millions of Australians, according to Treasurer Jim Chalmers and Assistant Treasurer Stephen Jones.

They give the example of a 25-year-old median income earner presently receiving their super quarterly and their wages each fortnight, who could be about $6000 (or 1.5%) better off when they retire.

The ministers argue there will be benefits to bosses, as well as to the workers, in the change. “More frequent super payments will make employers’ payroll management smoother with fewer liabilities building up on their books.”

They say payday super will mean employees can keep track of the payments more easily and it will be more difficult for disreputable employers to exploit them.

“While most employers do the right thing, the Australian Taxation Office (ATO) estimates $3.4 billion worth of super went unpaid in 2019-20.”

The ATO will get extra resourcing to help it detect unpaid super payments earlier. Treasury and the ATO will consult stakeholders on the changes later this year.

The ministers say the July 1 2026 start will give employers, superannuation funds, payroll providers and other parts of the superannuation system enough time to get ready for the change.

Source: The Conversation

Also read: Cost of living continues to hurt retail businesses

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From 1 November 2021, this will change. Instead of being able to make the superannuation payments to their default fund, employers will now have to check with the ATO to obtain details of the employee’s ‘stapled super fund’ and direct the super payments to this account.

Below we answer some key questions to help guide you through the changes as an employer.

What is a ‘stapled super fund’?

A stapled super fund is an existing super account which is linked, or ‘stapled’, to an individual employee so that it follows them as they change jobs.

Why the change?

The change aims to reduce account fees by stopping new super accounts from being opened every time an employee starts a new job, limiting the number of multiple superannuation accounts that employees can accumulate over their working life.

When do the changes start?

These new rules commence from 1 November 2021.

How do I obtain an employee’s stapled super fund details?

If the eligible employee has not chosen a superannuation fund, you will need to contact the ATO to request this information. This can be done by logging into the ATO Online Services and accessing the ‘Employee Super Accounts’ section. Your Tax Agent can also do this for you.

You’ll be able to request this information after a Tax File Number Declaration or a Single Touch Payroll (STP) pay event linking the employee to you has been submitted to the ATO.

There is also the ability to make a bulk request for over 100 employees at once. More details on how to access this information is available from the ATO here.

What if the ATO doesn’t have a stapled super fund for the employee?

If the employee has not made a choice and does not have a stapled super fund recorded with the ATO, you will be able to make the super payments to your default fund.

What happens if I don’t follow the super choice rules?

If you do not give eligible employees a choice of super fund you could receive a ‘choice liability’ penalty. The choice liability penalty increases the SGC.

A choice liability penalty may be applied by the ATO if you, as the employer:

• charge your employee a fee for implementing their choice of fund;
• do not provide a Superannuation Standard Choice Form within the required timeframe to your eligible employees; or
• you paid the employee’s super to a complying superannuation fund that they did not nominate and/or is not their stapled super fund.

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Currently, when a new employee doesn’t choose their own super fund, you must pay super contributions into your default fund.

From 1 November, if you have new employees start, you may have an extra step to comply with the choice of fund rules. If a new employee doesn’t choose a super fund, you may need to request their ‘stapled super fund’ details from us.

A stapled super fund is an existing super account which is linked, or ‘stapled’, to an individual employee so that it follows them as they change jobs.

The change aims to reduce account fees by stopping new super accounts being opened each time they start a new job.

From 1 November, you will be able to request stapled super fund details for new employees using Online services for business.

What you can do now

To make sure you’re ready when the time comes, check and update the access levels of your authorised representatives using Online services on behalf of your business. This will also protect the personal information of your employees.

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These measures will reduce waste in the system and save Australian workers $17.9 billion over 10 years by holding underperforming funds to account and strengthening protections around the retirement savings of millions of Australians.

Australians currently pay $30 billion per year in superannuation fees, while three million accounts sit in underperforming funds worth over $100 billion in retirement savings.

The Treasury Laws Amendment (Your Future, Your Super) Bill 2021 also addresses key recommendations from the Productivity Commission’s (PC) comprehensive assessment of the system, Superannuation: Assessing Efficiency and Competitiveness.

The Your Future, Your Super package is scheduled to commence on 1 July 2021. Under the package, the superannuation system will be significantly enhanced by:

• Having your superannuation follow you: preventing the creation of unintended multiple superannuation accounts when employees change jobs.
• Making it easier to choose a better fund: members will have access to a new interactive online YourSuper comparison tool which will encourage funds to compete harder for members’ savings.
• Holding funds to account for underperformance: to protect members from poor outcomes and encourage funds to lower costs the Government will require superannuation products to meet an annual objective performance test. Those that fail will be required to inform members. Persistently underperforming products will be prevented from taking on new members.
• Increasing transparency and accountability: the Government will increase trustee accountability by strengthening their obligations to ensure trustees only act in the best financial interests of members. The Government will also require superannuation funds to provide better information regarding how they manage and spend members’ money in advance of Annual Members’ Meetings and disclose all of their portfolio holdings to members.

This package builds on the Government’s superannuation reforms which include consolidating $2.9 billion held in unintended multiple accounts on behalf of 1.4 million Australians, capping fees on low balance accounts, banning exit fees and ensuring younger Australians do not pay unnecessary insurance premiums.

Under the Your Future, Your Super package, the Morrison Government is taking the next step in modernising and improving the superannuation system to ensure it is working harder for you.

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Once a new determination or agreement is in place, you’ll need to offer choice of super fund to:

• existing employees who request to choose their super fund
• all new employees.

Employees can nominate their chosen fund by completing the standard choice form through ATO online services linked to their myGov account.

Alternatively, you can give your employees a Superannuation (super) standard choice form to complete.

You must then pay the employee’s compulsory super to their nominated fund.

If an employee doesn’t nominate a fund, you can continue to pay their super to the same fund you previously contributed to, or into your default fund.

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Since the government’s superannuation announcement in mid-March, there have been nearly 90 reported incidents of these types of scams nationally. However, there have been no reported loses thus far. The scams were disclosed directly to the ACCC by Scamwatch.

Delia Rickard, ACCC Deputy Chair, said in a recent ACCC press release, “scammers are cold-calling people claiming to be from organisations that can help you get early access to your super”.

“For most people, outside of their home, superannuation is their greatest asset and you can’t be too careful about protecting it.”

Therefore, the severity of these scams could be enormous for some individuals. The ACCC warns the public how important it is to keep your superannuation information secure and strongly advises against providing any information to third parties.

“The Australian Taxation Office is coordinating the early release of super through myGov and there is no need to involve a third party or pay a fee to get access under this scheme. Never follow a hyperlink to reach the myGov website. Instead, you should always type the full name of the website into your browser yourself,” stated Mrs. Rickard in a press release.

“Never give any information about your superannuation to someone who has contacted you. Don’t let them try to pressure you to make a decision immediately, take your time and consider who you might be dealing with.”

Australians lost over $6 million to superannuation scams in 2019, with 45-54 being the age bracket that accounted for the largest amount of money lost to scammers, according to the ACCC.

Superannuation scams typically disproportionately target older individuals. However, since the government’s announcement granting partial access to supers due to COVID-19, it’s likely people of all ages will be targeted by these new super scams. It is important for people of all ages stay vigilant of superannuation scams to safeguard from the exploitation of hackers in the coming months.

The post The ACCC warns of new superannuation scam targeting COVID-19 decision appeared first on Small Business Connections.

With the introduction of Single Touch Payroll (STP) only weeks away, hundreds of thousands of small businesses are still yet to make the switch to the real-time reporting system. In fact, according to a YouGov galaxy survey of 517 micro-business owners in April found 70% had no idea what STP is.

Although the current STP rules require medium and large enterprises to send super and income tax information to the ATO, small businesses, with fewer than 20 people, will now need to implement the new process.

These changes were expected to affect more than 750,000 small and micro-businesses in the lead up to the July 1 deadline. For many businesses, this requires purchasing additional software or enabling the payroll component of their current accounting software to ensure they’re compliant. From Single Touch Payroll reporting to online accounting, get ready for the incoming ATO changes with Reckons Single Touch Payroll Hub and ATO-certified solutions.

But more than a third of small businesses in Australia admitted to not currently using any accounting and payroll software, A survey revealed the administration and ‘red tape’ of running a business was ‘killing the dream’ for almost 50% of survey respondents. But will these new ATO requirements dishearten business owners further?

Fortunately, using an ATO-certified accounting application means small business owners can manage STP reports from their smartphones – simplifying the process and cutting through all the red tape. STP is expected to have a number of benefits, including increasing efficiency within the tax system for businesses and the ATO and ideally making black economy activity harder. But the cost of implementing new software is yet another barrier for small and microbusinesses. Reckon chief executive Sam Allert says many microbusiness – businesses with between one and four employees – are still doing ‘shoebox accounting’ and might be overlooking payroll software that might save them time and money.

“This might be because they’re reluctant to digitise their operations due to limited capabilities, internet access, or cost,” Allert says. “Small business owners have enough to worry about without the distraction of admin and red tape.”

The fact these businesses are struggling with the weight of administration, highlights the opportunity to adopt technology advances to streamline their admin, Allert says.

Successful Endeavours managing director Ray Keefe doesn’t believe the ATO has done enough with regards to educating small businesses about the requirements, saying they had been informed by the ATO only after their accountants had already informed them.

“It makes sense to harmonise systems,” Keefe says. “With the recent discussions about employees not paid according to the minimum wage and businesses not paying superannuation a system that makes everything happen at the same time should ultimately make doing business easier and with more confidence.”

But Keefe’s chief concern with the rollout is a lack of understanding about what they need to know and what to do if they realise a mistake has been made.

“By giving customers a smartphone-based option, with an easy to use design, we’re improving the accessibility of ATO-compliant STP software,” Allert says, to hopefully combat any barriers small businesses face.

The ATO is still working out what STP reporting deferrals and exemptions it will offer, but as the soft deadline is fast approaching, small business owners can expect to hear more from the ATO in the coming weeks about what’s expected of them.

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