LATITUDE LINK 35

Overview
‘Payday super’ will overhaul the administration of the superannuation guarantee (SG), introducing new obligations for employers. From 1 July 2026, employers must pay SG contributions to employees’ super funds on the same day as their salary or wages, replacing the current quarterly payment system.

The aim is to reduce the $3.4 billion gap between what is owed and what has been paid, ensuring better retirement outcomes. The Government estimates that a 25-year-old median income earner, currently receiving quarterly super contributions, could be 1.5% better off at retirement with this new system.

Announced in the 2023-24 Federal Budget, payday super is not yet law, but Treasury has released a fact sheet to guide employers in preparing for the transition.

How Will Payday Super Work?

Under payday super, SG payments will be due within seven days of an employee’s payday. Exceptions include:

• New employees: Due after their first two weeks of employment.
• Small or irregular payments: Paid outside the employee’s usual pay cycle.

Employers already using Single Touch Payroll (STP) to report salaries will integrate payday super with STP, with additional adjustments to capture ordinary time earnings (OTE) data.

Impact on Employers:
A key challenge will be cash flow management. Employers can no longer hold 12% of payroll until the end of the quarter but must pay it on payday. However, this change ensures that unpaid SG contributions are limited, especially in cases of business insolvency.

What Happens if SG is Paid Late?

The penalties for late SG payments under payday super will remain punitive to ensure compliance.

Currently, the Super Guarantee Charge (SGC) for late payments includes:

• SG shortfall amount
• 10% interest per annum from the start of the quarter
• $20 administration fee per employee per quarter

Under payday super, late SG payments will incur additional penalties:

Unlike the existing system, SGC under payday super will be tax deductible (excluding penalties and interest if unpaid within 28 days).

Final Thoughts

Payday super is not yet law, but employers should start preparing for this change. We will continue to provide updates as the legislation progresses and support you in meeting the new obligations.

Note:
Ordinary time earnings (OTE) include the gross amount earned for ordinary hours, including over-award payments, commissions, shift loadings, annual leave loadings, and some allowances and bonuses.

The Ban on Genetic Test Insurance Discrimination

The Government has announced a ban on life insurers discriminating based on adverse predictive genetic test results. Predictive genetic tests identify gene variants linked to heritable disorders that may appear later in life but are not clinically detectable at the time of testing.

Current State of Life Insurance and Genetic Testing
Life insurance in Australia is individually underwritten and risk-rated, meaning premium costs reflect the specific risks of the insured. While policies are guaranteed renewable, insurers assess health risks at the policy’s inception, and premiums may adjust within risk pools (e.g., based on age).

In 2019, Australia introduced a partial moratorium restricting the use of genetic test results for life insurance applications. This moratorium set coverage thresholds:

*Includes income protection, salary continuance, or business expenses cover.

Despite the moratorium, 35% of consumers who underwent genetic testing reported difficulties obtaining life insurance, including higher premiums, rejected applications, and policies with conditions. An alarming example involved a 43-year-old woman with a BRCA2 gene variant. Despite proactive surgeries and ongoing cancer screening, she was denied life cover.

The Government’s Response

The Government’s proposal bans the use of predictive genetic testing in life insurance underwriting. This ban will be subject to a 5-year review but does not extend to clinical diagnostic genetic tests, which confirm suspected conditions based on symptoms.

International Approaches:

• UK: Predictive genetic results are not used unless favourable or voluntarily disclosed. Huntington’s disease is the exception for policies exceeding £500,000.
• Canada: The Genetic Non-Discrimination Act prevents insurers from requesting or using genetic test results, except when individuals voluntarily disclose favourable outcomes.
• USA: The Genetic Information Nondiscrimination Act (GINA) prohibits using genetic data for health insurance and employment but not for life insurance. However, Florida prohibits insurers from using predictive genetic data in underwriting.

Downsizer Contributions to Boost Super

If you are aged 55 years or older, the downsizer contribution allows you to contribute up to $300,000 from the sale of your home to your superannuation fund. In 2023-24, 57% of these contributions were made by women, with an average value of $262,000, slightly higher than the average male contribution of $259,000.

Eligibility and Conditions:

• Most common contributors: Aged 65 to 69.
• Funds can be withdrawn after 65, even if still employed.
• Individuals aged 55 to 64 cannot access funds until retired and aged 60.

The downsizer contribution is excluded from the work test, upper age limits, and total super balance rules. However, the amount transferred to a retirement pension is subject to the transfer balance cap.

Key Features:

• Couples: Both partners can contribute up to $300,000 each ($600,000 total), even if only one partner owns the property sold.
• No requirement to downsize: You don’t need to purchase a smaller home or buy another property to qualify.