Employers will be required to pay superannuation on payday, rather than quarterly, under reforms aimed at cracking down on the scourge of more than $3bn of super that goes unpaid each year.
The measure, announced by the treasurer, Jim Chalmers, and the financial services minister, Stephen Jones, will take effect in July 2026, giving businesses three years to prepare.
Employers are currently required to pay the superannuation guarantee of 10.5% on top of employee wages every quarter, even if workers are paid more frequently in fortnightly or monthly pay cycles.
Industry Super has argued that delay between payday and super contributions helps dodgy or insolvent employers to avoid paying super and makes enforcement more difficult for the regulator. This has contributed to an “eyewatering” total of $29bn in unpaid super in the last six years, the fund says.
“While most employers do the right thing, the Australian Taxation Office (ATO) estimates $3.4bn worth of super went unpaid in 2019-20,” they said.
The pair said more frequent super payments would help employers by making payrolls smoother with “fewer liabilities building up on their books”, and make it harder for employees to “be exploited by disreputable employers”.
“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%, better-off at retirement.”
The ATO will receive additional resources to help detect unpaid super payments earlier and the government will set enhanced targets for the ATO for the recovery of super.
Treasury and the ATO will consult on the changes in the second half of 2023, before they are introduced in July 2026, which Jones and Chalmers said would give “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.”
According to Industry Super, employees missed out on a total of $5bn in super in 2018-19, with almost 3 million workers short-changed, losing an average of $1,700.
In February 2022, the ATO commissioner, Chris Jordan, told Senate estimates that under the current payroll system the employer only discloses “the promise to pay an amount of superannuation” on payday.
“This is a relationship between an employer, an employee and a super fund – not us,” he said.
Jordan said collection of super was a “structural issue” because businesses often went insolvent by the time the ATO chased them for payments. “This is a terrible situation, no doubt in the world. This is money that employees lose.”
In April, Jones said payday super would result in a “significant and meaningful improvement in unpaid super”, which he described as a “tonne of money”.
The government also intends to include payment of superannuation in wage-theft laws, to be introduced in late 2023. That move won broad support from employers, including the Australian Chamber of Commerce and Industry.