New ‘Payday Super’ laws to hit Australian businesses with major cash crunch

Millions of Australians are set to get a major bump to their superannuation pay but it comes with a massive warning for small businesses.

Starting from July 1 this year, employers must pay their superannuation to workers at the same time as their regular salary and wages.

Currently, while superannuation appears on a pay slip, an employer only needs to pay the employee once every 90 days.

Treasury estimates the changes will mean a 25-year-old who earns the median income will be about $6000 or 1.5 per cent better off in retirement simply by paying superannuation every two weeks instead of quarterly.

This can be used to help with cash flow for the business.

Australian Taxation Office (ATO) deputy commissioner Emma Rosenzweig told NewsWire businesses need to start getting ready now.

“This is a once in a generation change, designed to address the problem of unpaid super and we want employers to give themselves the best opportunity to be ready,” she said.

Ms Rosenzweig said this is a critical change aimed at addressing the problem of unpaid super, while protecting the retirement savings of millions of workers.

“One of the really important aspects of payday super is it is designed to let the ATO identify where an employer isn’t paying super much faster,” she said.

“Because there are no longer quarterly payments, a business can’t build up a large debt that they may then have trouble meeting.”

She said the ATO will look to work with businesses to help them get “back on track” but if they are intending not to pay workers the tax office will know about it sooner.

Despite the huge change, around four in ten businesses already pay their super more often than quarterly.

To help the 60 per cent who currently are paying superannuation quarterly, the ATO has released several key points in a new checklist for businesses to use ahead of the policy change.

“The first step for businesses is to think about it now and start planning, it is really important to not leave it until the last minute,” Ms Rosenzweig said.

Small business face credit crunch

Business leaders warn of a looming credit crisis as employers take stock of a major change to how they pay workers superannuation.

Employment Hero founder and chief executive Ben Thompson explained to NewsWire while employees deserve the money they worked for it will put pressure on employers.

“This change is positive for working Australians, with more frequent super investment maximising the benefits of compounding growth.,” he said.

“The average Australian business will face a cash flow crunch of $124,000 according to our modelling. Most small businesses simply don’t have that kind of money lying around.”

According to Mr Thompson, about 87 per cent of businesses using Employment Hero software pay superannuation quarterly, temporarily using the superannuation payments as cash flow before they are paid to employees.

“With 26 per cent of businesses expected to face cash flow issues under Payday Super, we’re looking at real consequences for employment.”