Employers will soon be required to make superannuation payments on payday instead of quarterly, with millions of Australian workers potentially retiring with thousands more in their superannuation accounts.
The change is set to take place from July 1, 2026, giving employers, superannuation funds and payroll providers three years to make the necessary adjustments, according to a joint statement by Treasurer Jim Chalmers and Financial Services Minister Stephen Jones on Tuesday.
This means a 25-year-old median income-earner receiving fortnightly wages could have $6,000 more at retirement.
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Chalmers said the simple change was common sense.
“It will strengthen the system and will boost retirement incomes,” he told ABC radio.
“The main reason for that is it will make it less likely that people will miss out on the super that they’ve earned and that they’re entitled to.”
Chalmers said the lead time would give businesses a grace period to adapt to the changes.
“We have deliberately given employers and super funds and others a long run-up until 2026 so that they can prepare for this change,” he said.
According to Industry Super Australia, moving super payments could give millions of Aussies a boost in retirement amounting to as much as $50,000 or more.
Aussie workers are also likely to pocket more due to higher compound interest that comes from more frequent super payments.
The change could also drastically reduce the country’s “unpaid super scourge” which costs workers $33 billion over seven years, according to the fund.
Currently, employers are required to pay 10.5 per cent on top of employee wages every quarter.
In March, the Australian Taxation Office reported workers lost $3.4 billion in unpaid super in 2019-20.
The change will also benefit those in lower paid, casual and insecure work who are more likely to miss out when super is paid less frequently, which often affects women disproportionately.
Super Australia chief executive Bernie Dean said the super payment change is a “big win” for young Australians and those on lower incomes.
“This is a big win for the three million mostly young and lower-paid Australians unfairly deprived (of) the super they’ve earned and will give them a better shot at building a good nest egg for retirement,” Dean said.
“The government should be commended for listening and then taking the necessary steps to end the huge super rip-off which was undermining the future economic security of too many young women and others on lower incomes.
“Aligning payment of super and wages is the right thing to do by workers, boosts government revenue, lifts investment returns and puts all employers on a level playing field.”
Aside from young workers and women, the change to super payments will also benefit workers in blue-collar jobs, hospitality and retail, according to Industry Super.
The fund also says businesses will benefit from the change as it could mean a smoother payroll management system due to less build-up of large super contribution liabilities at the end of each quarter.
Payday super will also make it easier for employees to track their super payments and make it more difficult for some employers to exploit workers.
The super payment change also means the ATO’s resources will be boosted in a bid to crack down on compliance. It will also have a new target for recovery payments.
Treasury and the ATO will consult closely with industry and stakeholders on these changes later in the year.
– With AAP