Millions to be better off in retirement under compulsory payday super plan – Sydney Morning Herald

Millions to be better off in retirement under compulsory payday super plan - Sydney Morning Herald

Millions of workers will be thousands of dollars better off in retirement under federal government plans to require all businesses to pay their employees’ superannuation on payday.

The proposed update to laws that allow businesses to pay super quarterly will also make it tougher for employees not to pay the super guarantee at all – an issue that costs workers billions in unpaid super each year.

Treasurer Jim Chalmers said mandating payday superannuation would boost workers’ retirement incomes.

Treasurer Jim Chalmers said mandating payday superannuation would boost workers’ retirement incomes.Credit: Alex Ellinghausen

Treasurer Jim Chalmers and Assistant Treasurer Stephen Jones said millions of Australians would benefit in retirement from the change, which it wants to start from July 1, 2026.

“This simple change will strengthen Australia’s superannuation system and help deliver a more dignified retirement to more Australian workers,” they said in a statement.

Industry Super Australia research published earlier this year found moving to payday super would boost the retirement savings of 4.2 million workers whose super guarantee is currently paid quarterly. The peak body calculated the change would be cost-neutral for the government.

According to federal government analysis, switching from quarterly to fortnightly super guarantee payments, a 25-year-old worker on a median income will potentially be about $6000 better off in retirement.

The move will also improve the Australian Taxation Office’s ability to act on underpayments by identifying debts earlier. The Tax Office found employees missed out on $3.4 billion in unpaid super in 2019-20.

Chalmers and Jones said it would make it easier for businesses to manage their payrolls and reduce their accounting liabilities.

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“Payday super will also make it easier for employees to keep track of their payments and harder for them to be exploited by disreputable employers,” they said.

The ministers said the government would consult industry and stakeholders on the change in the second half of the year. The three-year lead time would give businesses, super funds and payroll providers time to prepare, they said.

Payday super is part of a broader push by the federal government to reform the superannuation system.

In February, after announcing the suggested wording for a legally enshrined definition of superannuation, Prime Minister Anthony Albanese announced the tax on superannuation earnings for balances over $3 million would double to 30 per cent from July 1, 2025.

That change will net the Commonwealth an additional $2 billion in tax revenue over the first four years, but the Coalition has urged the government to reverse that decision.

In March, Workplace Relations Minister Tony Burke introduced legislation to protect workers from superannuation underpayments. The bill would allow workers not covered by awards or enterprise agreements to take direct legal action to recover unpaid super.

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Source: smh.com.au

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