Payday super and the next data-led step in the ATO’s pursuit of Superannuation Guarantee non-compliance

Payday super and the next data-led step in the ATO’s pursuit of Superannuation Guarantee non-compliance 

28 July 2023

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In brief

The Government’s Federal Budget, delivered on 9 May 2023, included a number of key developments in a Superannuation Guarantee (SG) context. The most significant of these was the proposed introduction of payday super. From 1 July 2026, employers will be required to remit their employees’ SG entitlements on the same day that they pay salary and wages, rather than on a quarterly basis, as is the current obligation. 

However, payday super doesn’t just provide direct benefits to employees. Closer alignment between super remittances and salary payments will provide the ATO with better visibility of SG entitlements, allowing it to identify (and pursue) instances of non-compliance. To facilitate this, in advance of the introduction of payday super, the Government has also provided funding to enhance the ATO’s data-matching capabilities and introduced a measure requiring that the ATO report its unpaid superannuation compliance activity outcomes. 

In detail

Payday superannuation is being introduced from 1 July 2026 to provide employees with more timely contributions into their superannuation accounts. Under the new regime, employees will receive their superannuation into their accounts at the same time as they are paid, likely providing better investment and retirement outcomes. 

Conversely, it may create a negative change to cash flows for employers, depending on their current practice for managing superannuation remittances. 

However, payday super doesn’t just provide direct benefits to employees. It was also noted in the Budget papers that the real-time nature of the payments will provide better visibility to the regulator of the entitlements, allowing it to identify (and pursue) instances of non-compliance. 

In this regard, the changes to a payday super environment are the latest in the program of developments by the Government and the ATO to move to, and leverage, the value of real-time reporting, and follow on from the introduction of SuperStream and Single Touch Payroll (STP).

It is notable that, in addition to introducing payday super, in the same Budget, the Government allocated $27 million for the ATO to improve its data capabilities, including matching both employers’ and super fund data at scale. In addition, the Government will now require the ATO to report annually on recovering unpaid superannuation (one of the key recommendations put forward by the Auditor-General from his review of the ATO’s performance as SG regulator in April 2022) and included, as a target, the ATO raising $1,017 million in SG Charge in 2023-24.   

Identifying non-compliance through data matching

We have reported previously an increase in ATO reviews and audits focused on superannuation, driven, often, from data-matching between STP reporting and data gathered from other sources, such as SuperStream. Further to this, the transition to STP Phase 2 (STP2) has brought with it granular reporting where each payroll category now has an SG profile. It is likely that some of the aforementioned funding will be invested in real-time assessment of superannuation contributions calculated with reference to this improved STP2 data set. 

And now, the introduction of payday super gives another data source for the ATO to mine in due course. 

The commencement date for payday super has been deferred to July 2026, recognising that the introduction of this new regime will require employers, payroll providers and regulators to update their systems. In addition, the SG Charge regime will need to be redesigned to align with the requirement to pay superannuation more frequently. For example, late payment of super currently results in the levying of a $20 administration fee, charged cumulatively for each due date (i.e., quarter) that the employee’s contribution is late - therefore, up to a maximum of $80 per employee per year. If the due date becomes weekly (for a weekly payroll), then, if the regime is not redesigned, the administration fee could jump up as high as $1,040 per employee per year. 

Key takeaway for employers

The introduction of payday superannuation will be a significant change for employers. Even for those employers that currently remit superannuation concurrent with the payment of salary or wages, additional governance will need to be implemented around matters, such as super choice and super stapling, management of the remittance process (including the use of a clearing house) and review of bounce-backs. 

Additionally, it is clear that SG compliance will remain a focus of the ATO for the foreseeable future. Further, the recent passing of the Protecting Worker Entitlement Act (22 June 2023) means that, from 1 January 2024, SG will be introduced into the National Employment Standards, bringing it into the remit of the Fair Work Ombudsman as well.  

The significant Government funding towards data capability, the compliance targets and the broader focus on superannuation indicate that employers are well-advised to proactively review their superannuation governance, both as it applies now, and with an eye to changing obligations in the future.