The Council of Small Business Organisations Australia (COSBOA) is urging for a reform of the current administration, payment, and notification systems for employer superannuation obligations and penalties, highlighting that the proposed payday super scheme fails to address the complexity of super payments and existing issues.
Moreover, implementing payday super would result in increased processing costs for all parties involved, potentially burdening superannuation funds with up to 12 times more transaction volume and causing a reduction in super employee balances due to higher administration fees.
On the other hand, employers will face higher expenses for payroll software and super gateway usage, as every transaction will cost more. Despite different commercial offerings for payroll software, someone has to bear the cost of processing super.
“In the current system, employers are expected to use processes that are out of their control,” COSBOA said.
“The Superannuation Guarantee Contribution laws were established in 1992, at a time when paper cheques and remittance advice were the only payment system. The system is now outdated, and small businesses are calling for an overhaul of the administration, payment, and notification systems for employer superannuation obligations and potential penalties.”
According to COSBOA, the proposed payday super system raises processing costs for all parties involved. Can the Superannuation funds cope with up to a 12-fold increase in transaction volume without incurring extra costs?
Employee super balances could decrease due to higher administration fees. Employers will pay more for their payroll software and, subject to the super gateway utilised, pay more for each transaction. Payroll software has different commercial offerings, but someone is paying to process the super.”
The current penalty regime, imposed upon an employer if one of the parts of getting that payment into the employee’s super account fails, is also scrutinised by COSBOA. “The penalties include loss of tax deductibility, $20 per month administration fees, interest rates, and up to 200 per cent penalty amounts,” COSBOA noted.
“While we agree that deliberate or repeated underpayment of superannuation should be penalised, this penalty regime, designed in 1992, is no longer fit for purpose or targeted correctly. Employers must rely on their software, bank, clearing house, and superfund to process everything in the required time. We need a simpler and more efficient system that works for small businesses.”
Concerns over efficiency and costs
According to COSBOA, the proposed payday super system has raised questions about how employers will handle corrections and overpayments, especially with varying payments due to public holidays, allowances, loadings, and deductions. The transaction fees incurred through corrections, even for small amounts, also increase employers’ compliance costs.
The government-provided Small Business Superannuation Clearing House (SBSCH) needs to be equipped to handle payday super, with delays reported in payments taking months to be received by super funds. A significant overhaul is needed to accommodate the proposed more frequent super payments.
However, the vast majority of employers already pay super regularly and on time, with compliant employers often correcting shortfalls without external input. Penalising these compliant employers and increasing costs may encourage noncompliant employers to correct their errors and make timely payments.
COSBOA also noted that any proposal to implement compulsory payment of super on payday must be carefully designed to allow for error corrections and cost considerations. This means that any shortfalls found must be fixed and paid once per quarter in alignment with BAS reconciliation and verification processes. Small businesses already comply with the obligation to pay their super and plan their payments in line with all their other financial obligations. The government’s transition time frame mitigates any potential damage to payment times for others.
COSBOA also disputes the claim that employers should not hold employees’ superannuation contributions. Small businesses view superannuation contributions as an added cost of employing people, and they plan to pay their bills as required. COSBOA believes that Superannuation Guarantee laws need to be reformed to reflect modern systems and place fault and penalties on actual offenders. Consultation and co-design with small businesses are crucial in creating a workable system that doesn’t increase employer costs, disadvantage employee super balances, or punish compliant employers due to the actions of a few.
Here’s the COSBOA article.
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