Proposed payday super model ‘highly challenging’ for NFPs: BDO
Treasury’s proposed model for payday super will create significant challenges for the not-for-profit sector given the nature of the work, the accounting firm warns.
Legislation requiring employers to pay superannuation on the same day as salary and wages in place of the existing model will have some major impacts for not-for-profits, according to BDO director of tax, Judy White.
Treasury has proposed two potential models for payday super when it released its consultation on the policy in October.
In the first model, the employer payment model, the employer would be required to make the payment of an SG contribution on payday.
Where a payment is not made on payday, the employer would become liable to pay the SG charge from this date.
In the other model, the due date model, the employer would become liable to pay the SG charge if their employee’s superannuation contribution is not with their fund by a specified due date.
Ms White said that within the NFP sector, a significant number of employees work less frequently and for short engagements leading to continual and regular administration required to onboard large numbers of new persons, including obtaining superannuation fund details for those employees.
“Obtaining fund details under the Treasury’s proposed timing in the Payday Super model would be highly challenging,” she said.
Ms White also noted that due to the nature of the NFP sector and the presence of shift workers, there may be smaller or less frequent salary payments being made to employees.
“Where payday super is applicable, the employer will have increased administration requirements to make super contributions for employees for each pay period, noting there are often small payments that these are based on, particularly since the $450 per month threshold was removed on 1 July 2022,” she said.
In its submission on the payday super changes, BDO has called for a de minimis rule for superannuation shortfall, so that no shortfall component should arise where the superannuation shortfall is less than a certain amount such as $20, for example.
No applicable superannuation guarantee charge would apply either in those circumstances.
“In the NFP sector, sometimes if there is an honest inadvertent error in calculating the superannuation contribution, this can often result in relatively nominal amounts of super shortfall compared to the superannuation guarantee charge,” said Ms White.
“Also, potential penalties can apply, mainly when significant numbers of employees and smaller payments are involved.”
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