ATO sounds alarm as Payday Super deadline nears

The Australian Taxation Office has urged employers to act immediately ahead of the introduction of Payday Super on July 1, warning businesses have just five weeks remaining to prepare for one of the biggest changes to the superannuation system in years.

ATO deputy commissioner Emmer Rosenzweig said more than half of employees are still playing superannuation quarterly rather than alongside wages, despite the incoming reforms requiring contributions to be paid on payday.

The changes are designed to reduce unpaid super, which the ATO estimates currently totals around $6 billion owed to Australian workers.

"We understand Payday Super makes changes to obligations and processes for business which is why it's so important to act early," Rosenzweig said.

Under the reforms, employers will need to process super contribution significantly more frequently while also preparing for the closure of the ATO's Small Business Superannuation Clearing House on June 30.

The ATO said it would adopt a "reasonable and practical" compliance approach during the first year or implementation, focusing enforcement efforts on employers deliberately avoiding obligations rather than businesses making genuine attempts to comply.

The regulator also pointed to operations benefits from more frequent payments, with some small businesses reporting improved cash flow management and simpler payroll processes after shifting away from quarterly contributions.

As businesses prepare for the transition, financial services providers are expanding payroll and superannuation solutions aimed at easing the administrative burden.

Colonial First State (CFS) said it has broadened partnerships and digital capabilities ahead of the reforms, including integrating it's FirstChoice Employer Super with MYOB, Employment Hero, and Reckon.

The firm is also relaunching Essential Super for business to Commonwealth Bank business customers in June, including a clearing house payment facility designed to help employers manage contributions to multiple super funds through a single transaction.

Recent research cited by CFS found 62% of small businesses that do not currently pay super on payday expect the reforms to increase administrative effort, while more than a quarter remain unaware the changes are coming.