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Without significant changes to platforms and regulations, the shift to payday super could be a disaster waiting to happen, the Institute of certified bookkeepers cautions.
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Payday Super to require major overhaul of super system and processes, warns ICB
13 September 2024
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The Institute of Certified Bookkeepers (ICB) has warned there is significant work to be done by all parts of the super system in order to make the payday super changes feasible by 1 July 2026.
ICB executive director Matthew Addison said that since first being touted in 2015, the systems that require and enable payment of super from the employer through a myriad of intermediaries, payment and data platforms to eventually be allocated to the members account in a superfund, have not modernised with a view to allowing efficient payday super.
"The government’s own Super Clearing House has to complete full data matching and payment of one batch before it can even accept instructions or funds for the next batch," said Addison.
"It barely copes with performing this task four times per year (quarterly super). It will never be able to cope with processing super each payday."
Addison noted that approximately 250,000 employers use this clearing house.
"A contemporary replacement providing efficient superfund interactions is required, especially before payday super is implemented. What is the government’s solution to support small businesses?" he said.
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The ICB noted that around 94 per cent of super is paid on time by willingly compliant employers.
"Anecdotal evidence suggests of the 6 per cent not paid on time, 3 per cent are mistakes or system generated issues that are fixed reasonably proactively," said Addison.
"The other 3 per cent are the deliberate non-payers that should be detected and prosecuted by an effective regulator and quickly."
The ICB said while some are arguing that payday super is the panacea to ensuring all employees receive their maximum super value and superannuation theft is stopped, "it isn't the whole picture".
"An employee value in their superfund will suffer from increased costs in the system. With a transition to payday super, employers, superfunds and therefore employees will now be paying additional costs associated with super payments," it said.
Payday super will also mean greater payment and data transaction fees as the payday super amounts are processed through software, banks and payment gateways. It could also add additional administration costs for members, said Addison.
"I am yet to see any explanation from the superfunds as to how they are going to deal with so much more data, so many more rejected transactions and information requiring checking and at what cost," said Addison.
"With an alleged start date of 1 July 2026 there is significant work to do by all the parts of the system to make this work."
Despite some of the challenges, Addison said it payday super could work eventually by removing legacy administration processes and modernising the way payments are done.
"Adoption of New Payment Platform (using PayID or PayTo services) to support super payments from payroll software to super funds (or their administrators) should enable direct money straight to the members account," he said.
"Let’s remove the legacy administrative processes designed in a very different era (1991) that no longer add value in a digitised and streamlined world."
The ICB would also like to see the government better support employee onboarding and streamline information flow to employers through the access it has to data.
"While employers can in theory access a new employee’s existing fund information through a stapled fund service, this service is not yet fit for purpose," said Addison.
"Employers are blamed for so much of the loss of super value to employees. Yet they rely on the employee to provide the right and up-to-date information, the clearing houses to make the contribution get to the right members account in the right superfund and the payment gateways and data transmission systems.
"Other than initiating the payment, all other parts are out of their control. Employers should not be penalised by the antiquated and not fit for purpose SG Charge penalty regime when they are not responsible for all parts of the system."
Addison said a quick move to payday super was not the answer and that a plan towards modernisation and development of a fit for purpose information and payment super system must be embraced by government and the superfunds.
"Payment of super by employers on a monthly basis won’t break the existing systems and should be the vision for 2026," he said.
"Adoption of NPP, modernising the data requirements, an efficient employee superfund information system and better, quicker processing by all should result in maximum value to members of superfunds.
"The payday super journey is appropriate, but it needs to be co-designed and the Superannuation guarantee system modified. Most employers are not the problem. Rather than scream about the gap lets also acknowledge the willing on time compliance by the majority."
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