Don’t wait for the government to mandate the change, start paying your employees’ superannuation contributions monthly and get ahead of the change.
What is superannuation and how does it work?
- Superannuation is a compulsory retirement savings scheme for Australian workers.
- Employers are required to pay a minimum statutory rate (currently 11.5% for the FY2024/25) of their employees’ ordinary time earnings into a super fund of their choice.
- Employees can also make voluntary contributions to their super fund, either through salary sacrifice or after-tax deductions.
- Super funds invest the money on behalf of their members and pay them a regular income when they retire.
- Superannuation is taxed at a lower rate than other income, making it an attractive way to save for retirement.
Why is the government planning to change the super payment frequency?
- From 1 July 2026, employers will be required to pay their employees’ super at the same time as their salary and wages. This is not law as of today, but it will be highly likely to come into effect.
- Currently, most employers in Australia pay their employees super contributions quarterly, meaning every three months. Some employers are already paying at minimum these contributions monthly.
- However, this can create cash flow problems for employees with SMSFs, especially if their employer is late or fails to pay their super.
- The government is proposing to change the law to require employers to pay their employees’ super contributions in line with their regular pay cycle.
- This will ensure that employees’ super is paid more frequently and consistently, reducing the risk of underpayment or non-payment.
- This will allow for the funds to be in the employee’s superfund more frequently, and start earning interest and growth opportunities.
What are the benefits of paying your employees’ super monthly?
- While some employers may see the change as an administrative burden, there are actually many benefits of paying your employees’ super monthly, both for your business and your staff.
- Some of the benefits include:
- Improved cash flow management: By paying your employees’ super monthly, you can avoid having to make large lump sum payments every quarter, which can strain your cash flow and budget.
- Enhanced employee engagement and retention: By paying your employees’ super monthly, you can show them that you care about their financial wellbeing and future. This can boost their morale, loyalty, and productivity, and reduce turnover and absenteeism.
- Reduced compliance risk and penalties: By paying your employees’ super monthly, you can reduce the likelihood of missing a payment deadline or making a mistake in calculating the amount. This can save you from potential fines, penalties, and legal action from the ATO or your employees.
- Increased competitive advantage and reputation: By paying your employees’ super monthly, you can position yourself as an employer of choice and attract and retain the best talent. You can also enhance your reputation as a responsible and ethical business that values its employees and complies with the law.
How can you prepare for the change?
- If you are currently paying your employees’ super quarterly, you may need to make some changes to your payroll and accounting systems and processes to comply with the new law.
- Some of the steps you can take to prepare for the change include:
- Review your current payroll and superannuation arrangements and identify any gaps or issues that need to be addressed.
- Update your payroll and accounting software and ensure that it can handle monthly super payments and reporting (and future super payments as per employees pay cycle).
- Communicate with your employees and inform them of the change and how it will affect them.
These changes are not meant to be an administrative nightmare, so let the team at Omnia Business Solutions walk you through the benefits of transitioning from quarterly to monthly in preparation for the changes to payment as per the pay cycle.