Pre-Election housekeeping: Pay day super promise delivered

ANALYSIS

There are clear signs of the Government clearing the policy promises decks ahead of next year’s Federal Election with the delivery of pay day superannuation.

Pay day super has been on the Government’s agenda virtually from the get-go in circumstances where the major industry superannuation funds organisations have argued that deducting the superannuation guarantee from pay packets on pay day would help eliminate the instances of unpaid SG.

In fact, the Treasury discussion paper which helped underpin industry consultation around pay day superannuation noted that in 2019-20, more than $3.3 billion in SG entitlements remained unpaid and owning to eligible employees.

That same Treasury paper also noted that while the Australian Taxation Office (ATO) is responsible for monitoring the SG scheme, “due to the design of the SG system (including the frequency with which employers are required to pay SG, the operation of the SG charge, and limitations with the ATO’s IT capabilities to identify unpaid SG), many SG obligations remain unpaid for extended periods of time. This causes significant issues when employers enter liquidation without having paid their SG obligations”.

The Treasury document also noted that the during the 2022 election campaign the Government had made a commitment to set unpaid superannuation recovery targets for the ATO which would be made public and reported annually.

The Treasury then provided three options:

Option 1: Maintain the status quo (no change).

Option 2: Investment in ATO data matching.

Option 3: Require SG to be paid alongside an employee’s salary and wages (on payday)

The industry funds and, indeed, a significant proportion of the superannuation sector argued for payday superannuation and the Treasury made clear that the status quo was not an option.

It should surprise no one that the pay day superannuation option was always top of the list as an outcome, not only does it reduce the scope for employers to fall behind, increase the Government’s tax take, lift superannuation balances and, more importantly for superannuation funds, increase their funds under management.

But, of course, someone has to pay and it was acknowledged throughout the consultative period that there would be significant upfront regulatory costs as 697,000 employers adjust to the change.

Treasury made clear that employers would be required to fund the implementation costs including potential updates to Straight Through Procession (STP) reporting.

Delivering on pay day super means the Government has delivered for one of its wealthiest constituencies.