Albanese delivers to industry funds via pay day super

The introduction of the Federal Government’s pay day superannuation legislation to the Parliament means that three and a half years’ after taking office it has finally delivered on a core promise to its industry super funds constituency.

The legislation now has to pass the House of Representatives and the Senate but is expected to face little resistance or amendment, meaning that the regime will come into full operation from 1 July, next year, exactly as planned when Treasury opened consultation on the proposed legislation in October 2023.

The major industry superannuation fund groups had been lobbying for pay day super for decades pointing out year after year that high levels of unpaid superannuation were owed to the fact that employers have not been obliged to pay their superannuation guarantee obligations quarterly.

Indeed, the Treasury consultation paper referenced the fact that the Australian Taxation Office (ATO) had noted that “businesses often enter liquidation or bankruptcy before the underpayment is identified, limiting its ability to conduct effective compliance activities and recover unpaid superannuation”.

The October, 2023, consultation paper said that in 2019-20, the net SG gap was $3.4 billion. Yesterday, in announcing the legislation had been introduced to the Parliament, the Assistant Treasurer and Minister for Financial Services, Daniel Mulino said the level of unpaid SG was $5.2 billion.

The introduction of the legislation to the House of Representatives yesterday was broadly welcomed by the industry superannuation funds as well as the Financial Services Council (FSC).

However, the FSC, while acknowledging it as a significant advancement, noted that there would be “several implementation challenges” that would need to be addressed.

“The FSC is encouraged by the Australian Taxation Office’s (ATO) intention to take a risk-based approach to compliance during the first year of the Payday Superannuation reforms,” a statement from FSC chief executive, Blake Briggs said.

“This is a sensible step that recognises the scale of transition required across payroll systems and business processes and provides reassurance for employers acting in good faith.”

“We also welcome the Bill’s adoption of the FSC recommendation to change the contribution timeframe from seven calendar days to seven business days.  This adjustment will reduce the administrative burden on employers and superannuation funds and help prevent employers from being unfairly penalised for delays outside of their control,” the FSC statement said.

The Super Members Council (SMC) not only welcomed the legislation but called on “all parliamentarians to swiftly pass the laws.

“SMC has championed payday super laws as a key reform to help stamp out unpaid super, coupled with more proactive recovery of unpaid super by the ATO. The council’s landmark 2024 report comprehensively highlighted the scale of the unpaid super challenge.

“The Council’s latest modelling shows 3.3 million Australians missed out on $5.7 billion in super in 2022–23, losing an average $1,730 each a year. Those losses can make people up to $30,000 poorer at retirement,” it said.

The Association of Superannuation Funds of Australia (ASFA) said that pay day super will greatly increase the administrative load for superannuation funds which would need to process and invest contributions up to 12 times more often than before.

“The higher transaction volumes that will flow once Payday Super begins have required years of behind-the-scenes work to get our systems ready. We’re at the point now where we’re confident the sector will handle this major shift cleanly and efficiently,” ASFA chief executive, Mary Delahunty said.