Mat Gilroy

Australia’s second-largest super fund, the $260 billion Australian Retirement Trust, is urging employers to get ready for the “new future” for the administration of their superannuation payments, ahead of the introduction of payday super in 2026.

At a briefing for employer clients in Sydney on Thursday, ART’s head of employer, platforms and partnerships, Mat Gilroy, warned that the shift to the new payment, which comes into force on July 1 2026, would put employers under more regulatory pressure and see them subject to stricter surveillance by the Australian Tax Office.

He said almost half (49 per cent) of the 180,000 employers ART worked with were only paying their superannuation once a quarter, with another 40 per cent paying it monthly.

But the new legislation could see some employers now having to pay their super as often as weekly- prompting a big shift in their administration requirements.

Formed from the merger of QSuper and Sunsuper last year, ART is making a speciality of its ability to administer corporate super funds. It is now managing schemes for employees of Woolworths, Australia Post, the Reserve Bank, Virgin, Unilever, and PwC and is in the process of taking over the fund for Commonwealth Bank employees.

The superannuation industry is now digesting the federal government’s consultation paper on pay day superannuation which was released earlier this month.

Gilroy said superannuation had been seen as an “addendum” to payroll in the past, but it now needed to be integrated directly into the payroll system which would be an “increasing impost” on employers.

He said while superannuation was seen as just one of many things which employers had to deal with, it was “increasingly important that they get it right.” The government was pushing employers to consider superannuation as an integrated component of the way they handled their payments to their employees and not just an “add on.” He said the solution to the problem would need to be handled through the use of technology and the shift to payday super would mean more potential scrutiny by the ATO of superannuation payments.

There had been a big shift in the payment systems for superannuation since the introduction of mandatory electronic payments in 2015, Gilroy added. The government had been pushing for super payments to get into the hands of employees faster and didn’t sit in the hands of intermediaries.

He said the government had been “leading us over a number of years to a future that is coming,” from a system in 2015 where super was a predominantly manual, paper-based process where it took as long as 20 days for people to get their super payments to one where employees usually got their super in five days.

“Over the last seven years we have seen the digitalisation of super,” he said. “But we are only half way there.”

He said the shift to payday super would put more pressure on employers to start digitising the process, including the superannuation process, from the time the employee was hired.

“We are being pushed into a future of integration where everything happens in payroll, where an employee has to onboard digitally, where stapling of a super fund to an employee is something which could potentially feed straight into payroll through their tax file number.”

He said this would eventually lead to a “much more efficient” administration system and access to data for employers.

“But it will be a seismic change to the infrastructure that processes billions of dollars (of superannuation) a year,” he said.

He said the superannuation industry would be having discussions with the government following the release of its discussion paper on payday super. He said he expected 90,000 of the employers who work with ART to have to move from paying super quarterly to every two weeks.

“But some businesses which pay wages weekly will have to pay super 52 times a year,” he said.

“Any error will have implications for employers” and impact on their compliance obligations. “There is an immense increase on pressure on employers.”

“Our prediction is that more employers will move to a centralised payroll solution.”

Three possible options

He said the consultation paper also signalled the government was looking at how employees starting a new job chose their super fund. He said this involved three possible options – one where an employer was banned from any promotion of their super fund to the new employee, one where it was mandatory for the fund to contact the ATO to find out the employee’s existing fund or a requirement on employers to offer the stapled fund that the employee already had as first option, before they could be given a choice.

He said the shift would be particularly challenging for employers who had a high turnover of staff and those who paid wages weekly.

“It is an interesting shift, and you can see why technology is getting increasingly important in the superannuation environment. You are going to see an ecosystem, driven by technology, where this data hangs together. The impost is on employers is to get things accurate, timely and to be compliant. There is a lot of pressure in that.”

He said ART’s digital superannuation and payroll payment system called Beam, which was launched five years ago, was now being used by 90,000 employers with some 1,000 new employers joining every month.

He said the system was processing over 1.5 million transactions a year.

The move to payday super was announced in this year’s Federal Budget.

The government recently released a consultation on the issue called Securing Australians’ Superannuation.

Releasing the paper, Minister for Financial Services Stephen Jones said the change would “benefit the retirement incomes of millions of Australians. “This simple change will strengthen Australia’s superannuation system and help deliver a more dignified retirement to more Australian workers,” he said.

He said the change would also address the issue of unpaid superannuation by giving employees better visibility of their retirement savings.

“While most employers do the right thing, the Australian Taxation Office (ATO) estimates that employees were owed $3.4 billion worth of super in 2019–20,” he said.

He said the changes would improve the ATO’s ability to detect and recover unpaid super payments.

Consultation closes on 3 November 2023.

He said around 8.9 million Australians would benefit from higher retirement savings from receiving their Superannuation Guarantee contributions earlier and more frequently throughout their working life.

“By switching to payday super, a 25-year-old median income earner currently receiving their super quarterly and wages fortnightly could be around $6,000 or 1.5 per cent better off at retirement,” he said.

“More frequent super payments will also make employers’ payroll management smoother with fewer liabilities building up on their books.”

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