Explained: How pay day superannuation will prevent workers being ‘short changed’

The biggest winners from the changes will be young workers and those that work in heavily casualised industries.

The biggest winners from the changes will be young workers and those that work in heavily casualised industries. Photo: Getty

Australians will see their savings hit their superannuation accounts more often and be left better off in retirement under looming laws.

Reforms that will require employers to pay superannuation at the same time as wages will come into effect from July 1, 2026.

The changes, which were detailed in last year’s budget, will curb the non-payment and underpayment of super contributions, a problem that is costing workers across the country about $4.8 billion a year.

It hurts about 2.9 million workers each year, according to the Australian Taxation Office (ATO).

Matthew Linden, executive general manager of strategy at the Super Members Council (SMC), said that averages out to about $1500 per person affected by non compliance with compulsory super payment.

“We have 30-year-old laws that only require employers to pay their contributions on behalf of employees only four times a year,” he said.

“It means they’re not very visible to employees. They see what’s on their payslip, but that might not match up with what goes into their super account.”

Workers ‘short changed’

Linden said workers are being ‘‘short changed’’ by the current laws because their retirement savings don’t generate returns while they sit in the bank accounts of employers for multiple months at a time.

“Paying money more frequently into the super fund means it can be invested sooner,” he explained.

It also makes it harder for the ATO to police employers who pay superannuation late or even fail to do it entirely.

“At the moment there’s a long lag between when an entitlement  arises and when an employer has to pay the money,” Linden said.

“The amounts of money outstanding just become larger.”

The biggest winners from the changes will be young workers and those that work in heavily casualised industries where women are more likely to be employed in greater numbers than men.

Modelling undertaken by the SMC suggests that a worker in their 20s could be between $35,000 to $40,000 better off in retirement under the reforms because of how compounding interest works.

Workers will also see their super balances rise much more often once the laws are in force, which will make it easier to keep track of whether their employers – past or present – are doing the right thing.

Still a while away 

The laws won’t come into force until 2026 because the government has been mindful that businesses need time to adjust, Linden said.

There were measures in the most recent federal budget aimed at assisting businesses with cash flow issues before the introduction of pay day super and also funding for the ATO to enforce the laws.

About $315 million has been allocated to help deliver cash flow relief for businesses, while the tax office has received $13 million over four years for a crackdown on employers failing to obey the law.

Stay informed, daily
A FREE subscription to The New Daily arrives every morning and evening.
The New Daily is a trusted source of national news and information and is provided free for all Australians. Read our editorial charter.
Copyright © 2024 The New Daily.
All rights reserved.