Payday super will overhaul the way in which superannuation guarantee is administered.
While we don’t have legislation for Payday super, which will see SG paid within 7 days of an OTE payment being made, Treasury has released a fact sheet explaining how the mechanism will work. We explore the details.
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Inside this month, Michael Carruthers (Tax Director), Ann Dai (Tax Adviser) and Lisa Armstrong (MD) bring you:
Payday Super: First details released
Treasury has released a fact sheet detailing the proposed Payday Super measure announced in the 2023-24 Federal Budget. The reforms seek to address non-payment and underpayment of superannuation by forcing employers to make Superannuation Guarantee (SG) contributions more frequently. In this case, on the payday of the employee.
Set to take effect on 1 July 2026, employers will be required to make SG contributions on the same day they pay salary or wages to employees, rather than on a quarterly basis. Each time an Ordinary Time Earnings (OTE) payment is made, there will be a new 7-day due date for contributions to arrive in the employee’s superannuation fund. If the payment is not received within 7 calendar days, employers will be liable for a new SG charge, subject to some limited exceptions.
There will be an updated SG charge framework, which aims to ensure employees are fully compensated for delays in receiving SG amounts from employers. Larger penalties will be imposed on employers who repeatedly fail to comply with the requirements. The updated SG charge will comprise of:
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Outstanding SG shortfall
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Calculated based on OTE, rather than total salaries and wages as it is currently.
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Notional earnings
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The SG shortfall will incur daily interest from the day after the due date calculated at the general interest charge (GIC) rate on a compounding basis.
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Administrative uplift
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An additional charge levied to reflect the cost of enforcement, and calculated as an uplift of the SG shortfall component of up to 60%, subject to reduction where employers voluntarily disclose their failure to comply.
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GIC
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Interest will accrue on any outstanding SG shortfall and notional earnings amounts, as well as any outstanding administrative uplift penalty.
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SG charge penalty
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Additional penalties of up to 50% of the outstanding unpaid SG charge, that apply where amounts are not paid in full within 28 days of the notice of assessment.
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Unlike the current SG charge, the new SG charge will be tax-deductible, although penalties and interest that accrue if the SG charge amount is not paid within 28 days will not be deductible.
To support this transition, several changes will be implemented, including a reduction in the deadline for superannuation funds to allocate contributions to three business days (from 20 business days). The SuperStream data and payment standards will be revised and the Small Business Superannuation Clearing House will be retired from 1 July 2026.
The ATO will enhance its compliance measures by matching employer Single Touch Payroll data with superannuation fund reporting, allowing them to proactively identify late or missing payments.
It is anticipated that draft legislation will be released for consultation later this year.
More information
Foreign resident capital gains withholding rule changes
Treasury Laws Amendment (2024 Tax and Other Measures No. 1) Bill 2024, introduced into Parliament on 12 September 2024, covers a range of amendments to the tax system, including:
- Foreign resident capital gains withholding (FRCGW) payments
- Single touch payroll declarations
- Self-amendments by small and medium businesses
- Reducing use of cheques for tax refunds.
Schedule 1 of the Bill contains significant amendments to the current FRCGW regime. Under the FRCGW regime, a non-final withholding obligation is triggered on certain transactions for land and buildings located in Australia, and indirect interests in Australian property.
The Bill proposes to amend the FRCGW rate from 12.5% to 15%. Plus, the Bill removes the $750,000 threshold for property transactions, so all relevant property disposals will be subject to FRCGW irrespective of their market value. Currently, withholding obligations do not arise with respect to sales of Australian real property unless the market value of the property is at least $750,000.
Schedule 2 of the Bill amends the Tax Administration Act 1953 to allow employers to make standing declarations to their agent that are valid for multiple single touch payroll (STP) declarations, for up to 12 months. Currently, employers are required to prepare declarations to agents for STP each lodgment. This amendment will commence from the day after the Bill receives assent.
Schedule 3 of the Bill amends the Income Tax Administration Act 1936 to extend the amendment period for income tax assessments for small and medium businesses from two years to four years. Small and medium businesses will be able to apply to the Commissioner to amend notices of assessment within four years from the date the notice of assessment was issued, instead of the current time frame of two years. However, the provisions will not extend to amendments initiated by the Commissioner.
Schedule 4 of the Bill provides the Commissioner a discretionary power to retain certain tax refunds and credits for 90 days, to encourage taxpayers to provide valid Australian financial institution account details in an approved form to the ATO. This will reduce instances that the ATO has to pay refunds as soon as possible by cheque, as they can instead hold off until valid bank details are provided, or 90 days have passed.
Taxing social clubs and associations
The ATO is focusing on social clubs and associations that might be genuine not-for-profit (NFP) organisations, but don’t qualify as tax exempt entities.
Social clubs and associations are not income tax exempt entities unless they are either:
- A registered charity with the Australian Charities and Not-for-profit Commission (ACNC) and endorsed as tax exempt by the ATO, or
- Fall within one of the 8 specific categories of organisation eligible to self-assess under Division 50 ITAA 1997.
The categories cover the following:
- Community service organisations
- Cultural organisations
- Educational organisations
- Health organisations
- Employment organisations
- Resource development organisations
- Scientific organisations
- Sporting organisations
Organisations that are established for social or recreational purposes, or the common interests of members, would generally not be covered by these categories, and would therefore be taxable entities.
The ATO has also updated its website guidance on NFP self-review returns, which is relevant for NFPs that are not registered as charities with the ACNC. Charitable NFPs with only charitable purposes are required to register with ACNC and apply to the ATO to be endorsed as income tax exempt. If a charity does not register with the ACNC, it is not eligible to self-assess as income tax exempt, and will be taxable.
If the NFP is unsure of its tax status, it should select ‘yes’ or ‘unsure’ to the question ‘Does the organisation have any charitable purposes?’ on the NFP self-review return, and submit the return with an ‘income tax exempt’ outcome. The ATO may contact the NFP to offer guidance to determine its tax status.
More information
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