PwC flags ‘unexpected outcomes’ with proposed payday super model
Automatically counting late contributions towards the earliest payday with an outstanding SG shortfall could create “a tail of SG charges”, the big four firm has warned.
The proposed design for payday super will place a significant onus on employers to catch up and remediate errors as soon as practicable, PwC has warned businesses in a recent insight piece.
The government released design details for its payday super policy in a fact sheet earlier this month, which would require employers to pay their employees super at the same time as their salary and wages.
The fact sheet confirmed that the Payday Super regime is intended to commence from 1 July 2026, with legislative amendments to be introduced into Parliament before the end of the calendar year.
Under the proposed model, employers will become liable for the updated superannuation guarantee charge if super contributions are not received by their employees’ superannuation fund within seven days of payday.
The policy would also change the super guarantee charge framework to incentivise employers to quickly disclose and rectify any instances of unpaid superannuation.
PwC explained that under the current SG regime, in the event of a shortfall, an applicable SG charge is made up of three components:
- The SG shortfall calculated on applicable employees’ salary or wages (not just OTE)
- Nominal interest of 10% per annum (accruing from the start of the relevant quarter)
- Administration fee of $20 per employee, per quarter
The fact sheet proposes an ‘updated’ SG charge, with the three components being:
- The SG shortfall calculated on OTE (rather than the current salary or wages)
- Notional earnings comprising a compounding daily interest calculated at the general interest charge (GIC) (accruing from the day after the ‘due date’)
- Administration uplift, calculated as an uplift of the SG shortfall component of up to 60 per cent
"In addition, where an SG charge is assessed but remains unpaid, GIC will accrue on all three components on a daily compounding basis," PwC said.
"Further, if the SG charge is not paid in full within 28 days, an SG charge payment penalty of up to 50 per cent will apply."
The article explained that while the proposed design intends to make the SG charge deductible, "there are several deterrence components in-built".
"For example, the notional earnings’ daily compounding interest rate (at the GIC, which is currently 11.36 per cent) and the potential 60 per cent administration uplift."
The fact sheet notes that the administration uplift will be reduced when employers voluntarily disclose.
"This suggests that this will be a discretionary component that will be able to be toggled by the ATO based on factors such as compliance history [and the] nature of assessment," PwC said.
The proposed design also changes how late contributions are handled compared with the existing regime.
PwC said that where an employer makes a late contribution under the current law, they have the choice to count it as a contribution for the quarter in which it is made or to elect to utilise it as a late payment offset against the SG charge for the prior quarter.
"Under the proposed Payday Super regime, this choice will be removed; rather, contributions will ‘automatically count towards the earliest possible payday which still has an outstanding SG shortfall," the big four firm said.
"Whilst this concept appears logical in principle, it may provide unexpected outcomes [such as] creating a tail of SG charges.
"For example, where a single ‘payday’ was miscalculated and subsequently caught up, rather than count the subsequent catchup payment against the shortfall ‘payday’ (as a late payment offset), there would ostensibly be a series of SG charges for ‘paydays’ until the point of the catch up payment."
This is because contributions for a payday would be carried to the prior payday, creating a shortfall for the payday it is carried from, it said.
PwC said while the legislation may cater for this, it is clear that the design places a significant onus on employers to catch up and remediate errors as soon as practicable.
"Readiness for Payday Super will be much broader than simply adjusting one’s remittance cycle and processes for superannuation to cater for the ‘due date'," it said.
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