Bringing super payments in line with wages could give millions of Australians $50,000 more at retirement and reduce Australia's unpaid super problem that costs $33 billion over seven years.
This simple change will allow Australia to strengthen its superannuation system and provide a more dignified retirement for its workers. Millions of employees will benefit from this Albanese government reform.
The start date of 1 July 2026 provides employers, superannuation funds and payroll providers sufficient time to prepare for the change. Payday super is part of a broader government initiative to reform superannuation.
The joint media release from the ATO and the Hon Stephen Jones MP can be found on the ATO website.
Why Payday Super is better for business.
According to the ministers, employers and employees will benefit from the change. "More frequent super payments will make employers' payroll management smoother with fewer liabilities building up on their books.”
There was a concern that increasing super payment frequency might burden employers; however, with digital innovations like SuperStream and single-touch payroll, super payments are automated, requiring no extra manual effort.
Many employers already pay superannuation entitlements when they pay wages to their employees; this means everything remains the same for them.
How Payday Super benefits the employee.
According to Industry Super Australia chief executive Bernie Dean talking about Payday Super, "This is a big win for the 3 million mostly young and lower-paid Australians unfairly deprived the super they've earned and will give them a better shot at building a good nest egg for retirement,".
For example, with Payday super, a 25-year-old median income earner paid super quarterly, and wages fortnightly could be about $6,000 or 1.5 per cent better off at retirement.
Employees will pocket more due to higher compound interest from more frequent super payments.
With the Payday super system, employees can keep track of their payments, making it harder for disreputable employers to take advantage of them.
Super will be paid more frequently, so the casual and insecure workforce will no longer miss out. A large proportion of this group consists of women.
Payday super and future reforms will benefit women, including the government's review of the best timing for super payment on the Commonwealth Parental Leave Pay scheme. This will improve retirement outcomes for women. The estimated increase in contributions is based on an assumed 15 per cent increase in ATO compliance activity due to the following:
- The ATO receives more complaints about noncompliance due to employees' greater visibility over their super contributions.
- Super guarantee payments are often used for cash flow management, resulting in business noncompliance.
Why Payday Super is a winner
Payday super is a winning formula as it will make it harder for employers to dodge paying superannuation.
- About 2.5 million employees missed $4.3 billion in super in 2019-20, with over a quarter missing an average of $1,736 per year, according to Industry Super Australia (ISA).
- The Australian Tax Office (ATO) more conservatively estimates there is about $3.4 billion in unpaid super each year, based on its compliance activities.
Uncovering unpaid super
As a result of this reform, the ATO will be able to monitor complaints in real-time and act quickly, eliminating the need to wait until quarter-end to investigate them. The ATO will target to recover unpaid super and treat deliberate and systemic underpayment of super as wage theft.
Super Consumers Australia chief executive Xavier O'Halloran noted that real-time payments would bolster the ATO's ability to detect missed super payments. "This will allow the ATO to take timely action to remind employers who have made a genuine mistake to pay and take more serious action against employers engaging in wage theft," O'Halloran said.
The ATO will receive additional resources to detect unpaid super payments early, and the Government will set enhanced recovery targets for the ATO. In the second half of this year, Treasury and the ATO will consult closely with industry and stakeholders on these changes.
More information can be found on the ATO website if you need to report unpaid super.
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