National
Aussie Small Business Payday Super Changes Begin July 1
Australian businesses will be required to pay superannuation alongside wages from July 1, 2026. While many support the reforms, concerns remain about cash flow, delayed customer payments and the financial impact on small businesses.
Australian small businesses are gearing up for payday super reforms due to come into effect on July 1, 2026. The Employer’s superannuation contribution (currently 10%) under new rules must be paid at the same time as employee wages rather than quarterly.
The reforms are intended to address unpaid and late super payments, but many businesses are worried that cash flow will be impacted.
New rules should help decrease unpaid super
The changes ensure easier access and better visibility into employers' contributory status, as employees benefit from receiving their superannuation sooner.
Superannuation underpayment according to the Australian Taxation Office (ATO) sees roughly $6.2 billion dollars going unpaid every year. The new system is designed to ensure workers get the pension savings they should be entitled to and make it simpler to identify missed payments.
The reforms follow three consecutive years of increases in the superannuation guarantee rate, lifting it from 10.5% in 2023 to 12% on employee wages.
Easier access to cash became another challenge
The biggest challenge, according to the majority of business owners is going to be managing cash flow. Many businesses find themselves having to pay wages before getting paid by customers, which is altogether pressure even more so when super also has to be paid at the same time.
From a survey conducted by Xero, 87% of businesses believe the reforms will add to cash flow pressure. Concern over delayed customer payments was the biggest concern for more than half.
Clients typically pay SMEs seven days late. About a third of business owners think that they might have to dip into their own savings, and nearly a third say they probably will have to take out loans in order to fund the new needs.
Many Businesses Still Preparing
MYOB estimates up to 400,000 small businesses (15 per cent) remain in the dark about the changes. Additionally, several businesses have moved to payday super payments to allow them to test their systems in preparation and improve cash flow planning prior to the deadline.
The ATO says early reports from businesses already using the system are positive, with some stating smaller and more frequent payments allows them to keep on top of their obligations.
ATO to Take Transitional Approach
Tax professionals are advising companies to prepare now by examining their payroll procedures and cash flow planning.
This is particularly the case right now, as confirmed yesterday when the federal government announced that there will be a transitional compliance approach taken by the ATO in relation to reforms during the financial year 2023. We will not prosecute employers who fall foul of the new system if they encounter genuine problems related to implementation.
Source: ABC News
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