2023 has seen a lot of talk about superannuation. Much of it has focused on the announcement of super tax changes that will affect 0.5% of Australians – those with balances over $3 million – but that’s something businesses don’t have to worry about.
It’s the recent announcement that quarterly payments are set to end in 2026 which needs to be on your radar. For some businesses, this could be a major change to how super fund contributions are made, while others might find it’s business as usual.
Quarterly payments phased out
- From July 1, 2026, all employers will have to pay super on each payday rather than quarterly
- The average 25-year-old’s super could be $6,000 when they retire as a result
- More frequent payments will allow more time for investment earnings to compound interest
Treasurer Jim Chalmers said it’s common sense to pay super with wages, and the latest announcement regarding superannuation payments is a positive one for workers and businesses.
“It’s a simple change, it will strengthen the system and it will boost retirement incomes – and the main reason for that is that it will make it less likely that people will miss out on the super they have earned and that they are entitled to,” Treasurer Chalmers said.
There will be benefits for businesses and workers alike. Regular super contributions are easier to track and you can ensure funds are not late or unpaid entirely. Any issues regarding payments can be addressed as they happen rather than months later.
More frequent super payments have not been introduced just to boost retirement funds. It will provide more transparency to keep businesses compliant as an estimated $3.4 billion in super was unpaid in 2019-20, according to Industry Super Australia (ISA). 2.5 million employees were impacted by unpaid super.
Some businesses already pay super on each payday, meaning their operations remain unaffected. Others pay monthly as per specific super fund requirements, while many work to the four quarterly due dates.
Regardless of how you operate, with almost three years to implement change, there’s plenty of time to adjust and update internal systems processes.
Regarding quarterly super payment due dates and the super guarantee charge (SGC) applicable to overdue payments, the Government has not publicly announced how the SGC will be implemented from 2026.
Super guarantee rate goes up
Looking at the near future, super changes are on the horizon.
- The super guarantee rate increases from 10.5% of an employee’s salary to 11% on July 1, 2023
- The rate will increase twice more over the coming years as it moves toward the Government target of 12% in 2025
If you have not yet done so, you can calculate the new super guarantee contributions through the Australian Taxation Office (ATO) website. The ATO’s calculator will allow you to calculate contributions based on weekly, fortnightly, monthly or quarterly pay cycles
It’s also best to advise staff of the changes as it could be a considerable jump for staff receiving the incoming 15% pay rise as well. For example:
- Under the Aged Care Award, a full-time level 3 employee currently earns $867.30 per week (38 hours) on a base hourly rate of $22.82
- Their weekly super guarantee contribution is approximately $91 at the 10.5% rate
- From July 1, their 15% pay rise takes their weekly earnings to $997.40
- That means their weekly super guarantee will rise to approximately $109 due to the higher wage and 11% super guarantee contribution
The super guarantee percentage rate will increase to 11.5% from July 1, 2024.
The information in this article is general in nature and does not constitute financial advice. If you have any specific questions regarding superannuation, consult a financial advisor or similar.
