BDO pushes for employer-focused amendments to payday super legislation

BDO Australia has outlined recommendations for improving the draft payday super legislation for both employers and employees.

In a submission to Treasury, Judy White, executive director of BDO, and Lance Cunningham, national tax technical leader, said they had provided feedback on the exposure draft to support the broader superannuation system and employers.

“BDO is fully supportive of employees receiving their full entitlement of superannuation contributions on a timely basis,” White and Cunningham said.

“BDO also supports a fair and equitable superannuation guarantee system for employers that ensures that employers are not at risk of penalty when they are striving to be compliant.”

In its submission, BDO said the payday super period should be amended to 28 calendar days rather than seven calendar days, or seven business days.

The amendment would ensure employers were not held responsible for circumstances they couldn’t control by ensuring compliance was based on when an employer made the contribution, such as when the employer arranged payment via a bank account.

Amending the calendar day period would ensure employers were not responsible or penalised for circumstances they couldn’t control, as well as ensuring the proposed payday super law balanced fairness and feasibility, BDO said.

It also recommended that the seven calendar day compliance period for small and medium businesses be changed to a staggered system, similar to the remitter status system for PAYG withholding.

Small businesses with an aggregated turnover under $10 million, for example, could only be required to pay quarterly, it said, while medium businesses with aggregated turnover of at least $10 million and under $50 million could pay monthly. Large businesses with an aggregated turnover of at least $50 million, however, should be required to pay within seven business days, said BDO.

The submission also suggested a re-design of the new penalty regime to reduce the severity of impact for employers who demonstrated compliance with the new law. It has also called for the introduction of a de-minus rule for nominal shortfalls to avoid charges.

BDO also said that there should also be a maximum period set in which the ATO can require employers to correct superannuation payments.

"Under the current superannuation guarantee law, the ATO can require corrections of superannuation payments to go back to the start of the regime in 1992; or further back than 5 years. By capping this period at 5 years, it would be aligned to the record-keeping requirements," said BDO.

White and Cunningham said a penalty regime should remain as a form of deterrent for non-compliance.

"The proposed penalties can be considered harsh, especially where honest inadvertent errors have arisen from otherwise compliant taxpayers,” they said.

Furthermore, BDO recommended for the re-design of the administrative uplift component to allow for more fairness to employers by ensuring that uplift was not levied where honest mistakes had been made and where contributions were made but not processed within the seven-day compliance period due to factors beyond control.

White and Cunningham also proposed that the start of the legislation should not be enforced until the beginning of the first financial year that occurred at least 12 months after its royal assent, rather than 1 July 2026, given the significant changes required.

Despite making several recommendations to the draft legislation, White and Cunningham said BDO applauded the proposed new measures to align the superannuation guarantee shortfall with ordinary time earnings rather than salary or wages, making the charge tax deductible and making the maximum contribution base on an annual basis.