The Albanese government is reforming superannuation payments, as a consultation paper considers rules that tie employer contributions to pay days.

The Treasury analysis,  published on Monday, explores how employers will be required to pay contributions at the same time as wages – a move that targets billions in unpaid superannuation.

Treasurer Dr Jim Chalmers said $3.4 billion worth of superannuation went unpaid in 2019-20.

Nearly nine million Australians will benefit from receiving super earlier and more frequently, Chalmers said on Monday.

“From July 1, 2026, super must be paid on payday, a change that will benefit the retirement incomes of millions of Australians,” he said.

“This simple change will strengthen Australia’s superannuation system, and help deliver a more dignified retirement to more Australian workers.”

So how will the reform work, and how will it affect the retirement savings of Australians?

Superannuation gap crackdown

Firstly, the payday super changes are designed to help address a broader problem plaguing Australian workers and their retirement savings – employers failing to make super contributions.

Australian Taxation Office (ATO) figures estimate that the gross gap between the super bosses were required to pay and what they actually paid was about 5.9 per cent in 2019-20.

Accounting for tax office intervention, the figure falls to about 4.9 per cent or $3.4 billion.

But this underestimates the actual lost value of unpaid super because if this money was paid, as is required by law, it would be invested and generate returns far higher than the base amounts.

Industry Super Australia research has estimated unpaid super can leave workers tens of thousands of dollars worse off in retirement, even if they’re only underpaid small sums.

Treasury said on Monday that unpaid super is “equivalent to wage theft”, and that an overhaul of payments would make it more difficult for employers to shirk their obligations.

“Non-payment and underpayment of SG [super guarantee] contributions is equivalent to wage theft and has significant impacts on retirement outcomes,” Treasury said on Monday.

“[It includes] delaying retirement, reducing the retirement savings of individuals due to the loss of compounding returns in the fund, and results in a loss of insurance coverage for some.”

Payday superannuation

The latest reforms will require bosses to pay super more often and at the same time as other entitlements like wages.

The idea is that workers will receive their super contributions as close to payday as possible, which will maximise invested returns and help them work out if they’ve been paid correctly.

Employees will be able to more clearly see how much super they’ve received on their payslip each cycle (such as fortnightly) rather than the current system where super is paid separately.

Crucially, it will also help the ATO identify where super may have been underpaid because it will make data matching between wage and super payments faster and easier for tax office officials.

Estimates circulated by the Treasurer on Monday suggested a 25-year old median income earner who is being paid their super quarterly and their wages fortnightly would be about $6000 (or 1.5 per cent) better off at retirement under the changes.

Under the changes, the tax office would assess whether bosses are paying super correctly more often, at first sending a “nudge” to employers where they’ve identified unpaid entitlements.

From there, the ATO will investigate and if super remains unpaid it will eventually issue fines.

Employers who don’t pay super on payday would be liable for fines (or so-called “SG charges”) which will also be reformed under the new system so that the ATO has access to “a verifiable payment data point”.

In other words, the tax office will be able to monitor compliance with super laws in real time.

The New Daily is owned by Industry Super Holdings.