Payday Super: Navigating impacts on Not-For-Profits in 2023-24

In October 2023, the Treasury released a consultation paper on Securing Australians’ Superannuation Budget 2023-24 (Payday Super), which sought input from industry and stakeholders on the policy and legislative design of the framework for Payday Superannuation. As announced in the 2023-24 Budget, employers will be required to make superannuation contributions on the same day they pay salary and wages, rather than quarterly.

Our Tax experts highlight the impact these proposed policy changes may have on the Not-For-Profit (NFP) sector:

Onboarding

In the NFP sector, a significant number of employees work less frequently and for short engagements leading to continual and regular administration required to onboard large numbers of new persons (including obtaining superannuation fund details for those employees). Obtaining fund details under the Treasury’s proposed timing in the Payday Super model would be highly challenging.

Smaller payments

Due to the nature of the NFP sector and the presence of shift workers, there may be smaller or less frequent salary payments being made to employees. Where Payday Super is applicable, the employer will have increased administration requirements to make super contributions for employees for each pay period, noting there are often small payments that these are based on (particularly since the $450 per month threshold was removed on 1 July 2022).

Nominal super shortfalls

In the NFP sector, sometimes if there is an honest inadvertent error in calculating the superannuation contribution, this can often result in relatively nominal amounts of super shortfall compared to the superannuation guarantee charge. Also, potential penalties can apply, mainly when significant numbers of employees and smaller payments are involved.

In our submission, we have recommended introducing a de-minimus rule for the superannuation shortfall, such that no shortfall component should arise where the superannuation shortfall is less than a certain amount (e.g., $20). No applicable superannuation guarantee charge would also occur in those circumstances.

Questions? Contact us

To learn more about our submission and proposed solutions for implementing a redesigned compliance framework for payday superannuation, click here. For more information about our services, get in touch with our team today.