The Payday Super Warning for Small Business

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The Payday Super Shift.

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Welcome to IO Insolvency Options with

Darren Varney, the managing director

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of Insolvency Options and a registered

liquidator with over 30 years of

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experience helping businesses and

individuals navigate financial challenges.

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In today's episode, Darren examines

the massive changes coming to

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payroll and superannuation, and

reveals how these shifts will

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impact small businesses' cash flow.

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He explains the risk of personal

liability for directors and why

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the 1 July deadline is a critical

turning point for business viability.

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You'll learn about the transition

to Payday Super, the closure of

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the Small Business Superannuation

Clearing House, and how to manage

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more frequent cash outflows.

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I'm your co-host, Anthony Pearl.

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Let's dive into unlocking

more about insolvency options.

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We're about to air this episode where

this should come perhaps with some warning

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sirens going around for small businesses.

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There are massive changes to

payroll, to superannuation that

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impact all small businesses.

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Talk me through the changes and indeed

what the impact is going to be and how

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we're gonna see some people falling

into perhaps knocking on your door.

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Darren : Yeah.

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So what we have coming 1 July is a

change to the National Superannuation

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legislation, and what is being introduced

is what is to be known as pay day super.

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Now, what that means is that Australian

employers must pay their employees

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superannuation guarantee contributions

at the same time as their normal

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salaries and wages, rather than what

has typically been on a quarterly basis.

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So this mandate is actually aimed to

further reduce that unpaid superannuation

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obligations to the employees.

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Superannuation is part of

an employee's entitlement.

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It is something that must be paid at the

rate over and above their gross wages.

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We've seen with the director penalty

regime and making directors personally

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liable for outstanding super, that has

had a, a significant impact in reducing or

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minimizing any unpaid super to employees.

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However, with superannuation, particularly

where it's paid on a quarterly basis, if

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a business is incurring some cash flow

difficulties or financial hardship, quite

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often they find it hard to provide for

that lump sum quarterly payment of super.

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So what the purpose of the pay day

super is for it to be paid at the same

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time as wages and for the cash flow,

for want of a better term, streamed,

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so there eliminates the lumpy payments

to be made on a quarterly basis.

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Anthony: Yeah.

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It seems logical on that level that it

will help small businesses in the sense

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that there isn't this huge amount all

the time, and it's a consistent amount.

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But of course, the problem with

small business as well is that

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you're impacted by cash flow, and

it has a domino effect, doesn't it?

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You get one key client that is impacted

by its own cash flow problems and someone

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being slow to pay, et cetera, and then

it has a flow-on effect down the line.

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Darren : Yes.

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That's it.

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And look, cash flow management will

be key with all this, particularly

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where contributions are to arrive

in super funds within seven business

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days of the pay day to avoid SGC,

superannuation guarantee charge.

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And we all know that any monies

owing on SGC, any interest payable on

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SGC isn't claimable as a deduction.

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So it's really important that business

owners review their cash flow and

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look at getting that right with the

quarterly payments becoming obsolete.

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And businesses now need to

actually pay more frequently.

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But I do believe that whilst

there will be more frequent cash

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outflows, I would suggest that that

might be a lot easier to manage.

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Anthony: So from your perspective,

Aaron, and you've dealt with a lot of

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businesses over an extended period of

time, there are, you know, these kinds

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of payments, superannuation and the

like, often being accrued and leading to

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businesses going insolvent and closing up.

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Do you think that they were going to

have a period now where this shift may

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actually impact and increase that for

a little bump in the road, and that,

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that it should actually slow down

the impact that you've seen over the

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years of, of businesses being unable

to pay some of these things and being

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part of the reason why they close?

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Darren : I'd suggest so, yes.

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I, I think that probably for the first

12 months, it will be a little chaotic,

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and there may be an acceleration of a

number of businesses that enter into

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external administration because they need

to pay the superannuation sooner, i.e.

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payday, rather than later, i.e.

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quarterly.

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Because I think the position is this: if

the business is unable to pay its debts

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as and when they fall due, question really

needs to be asked as to the viability

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of the business and why the business

is continuing to exist if it can't

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pay those liabilities as they are due.

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Anthony: Yeah, I mean, it's going

to be an interesting ride, isn't it?

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I mean, I think the question for small

business is, and this might be something

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that you look at when you go into a

business where they are knocking on

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your door because the administration

is a real possibility, what sort of

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systems do they need to have in place?

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How do small businesses need

to change and cope with this?

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Darren : Look, it's expected that

the majority of accounting systems

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will have an upgrade to enable the

payment of Payday Super come July.

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But what business owners will need to

do is need to review their accounting

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systems and ensure that they will

be updated to provide for the new

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Payday Super regime coming in.

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You know, payroll systems must be

updated to ensure the calculations

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are correct, but also to ensure

that the super is paid in real time.

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And what we're finding is that from

the 30th of June, the small business

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superannuation clearing house will

no longer be available, so users

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really need to look to transition to

an alternative option to enable the

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payment of their employees' super.

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So we're now seven weeks out from

30 June, so time is now for business

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owners to start looking at that.

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Anthony: When it comes to all of this

sort of stuff, there's a lot of pressure

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on small business, and now they're

looking at their books and they're going,

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"Oh, we're going to have a problem."

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Is it going to lead to

potentially some unemployment?

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Are businesses going to say, "Well, look,

we've got one staff too many now, and

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whilst when the cash flow is a little bit

better, we can afford to carry that, and

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on a quarterly basis, you can potentially

carry that a little bit further."

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Now because of this, is that going

to be a reality, do you think?

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Darren : I think there's probably

a couple of different scenarios

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that will be the reality.

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Firstly, if a business is carrying

too many staff and is unable to cover

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the cost of employment, there will

need to be some redundancies We also

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look at the situation where we talk

about capacity and productivity, and

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where instead of employing a new staff

member, a business owner will look

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at the productivity within and the

capacity within and look to absorb the

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additional work that needs to be done as

opposed to employing a new staff member.

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And that will have a critical impact on,

in my view, the country's unemployment.

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Anthony: Yeah.

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I mean, there's a lot of pressure

on at the moment, isn't there,

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with all of these things?

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I mean, in many respects, with all the

pressures on externally that are going on

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in the world at the moment, interest rates

going up and the like, this is another

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hard thing for small business, isn't it?

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Darren : It's another change.

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And, you know, people traditionally don't

like change, and it's something that

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is being forced upon all businesses.

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So the earlier that the business owner

looks at what needs to be done, make sure

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that they're ready for it and they're

comfortable with it, the better they

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will be during the transition period.

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Anthony: And how does the

process going to work if a small

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business misses a deadline?

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Like, how much leeway is there?

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Is it right, you know, it's 12:01,

so just after midnight, and are we

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getting an alert from the ATO saying,

"You haven't paid your superannuation"?

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How will the process work?

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Darren : As I understand it,

it's a voluntary disclosure.

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So if payment is not made on time to

the superannuation funds, the business

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owner has a voluntary disclosure regime

whereby they must complete the ATO forms

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to advise the ATO that they've not paid

on time, and which will then give rise

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to SGC, which is the Superannuation

Guarantee Charge, whereby the ATO will

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then calculate any outstanding interest,

any admin fees and charges payable, and

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that will then add to an amount additional

to the super payable by the company.

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Anthony: And there are increasing

obligations as well around

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superannuation in terms of the, the

amounts that are being paid into

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superannuation these days as well.

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So that again, is something else

for business to be aware of.

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Darren : Yes.

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Anthony: All right.

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And so with all of these things that are

going on, I mean, what are the triggers

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that you see people coming to you from,

and what can you do when you go into a

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business that this may have triggered

a discussion around administration?

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Darren : I think it will all come back

down to businesses proactively looking at

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their cash flow, looking at the business

they're doing, their debtors, where their

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aged payables and receivables sit, really

drilling down to that monthly, if not

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more frequent, cash flow statements to

ensure that they have money, sufficient

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funds coming in to enable all employment

costs to be paid on the payday.

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Anthony: And those sorts of triggers and

things that people are going to have to

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be looking at, it's interesting when you

think about it, you don't have to have any

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qualification to set up a small business.

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You can open a business immediately, and

yet there are all of these obligations and

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things that people are expected to know.

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And I think that's the hard part, isn't

it, as well, is that I imagine you

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encounter plenty of people where it's a

degree of ignorance that would happen that

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finds them in some of these situations.

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Darren : And also, you don't

know what you don't know.

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I think there's a difference

between ignorance and just simply

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not knowing, and I think a lot

of people fall into the latter.

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They just don't know what they don't

know, and the, the problem is the

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risk and personal exposure that

can come from being a director.

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Because if the company is unable to make

payment for the superannuation, there's

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a personal exposure to the director.

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If it's unable to pay its debts as

and when they fall due, there's a

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personal exposure to insolvent trading.

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So whilst a business owner may be a

good operator, they also need to be a

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business person to ensure that those

risks, those personal exposure risks,

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are properly and appropriately managed.

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Anthony: And I guess this all falls

back down to as well, a simple thing

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as a business owner, that if you've

got an accountant or a bookkeeper or

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both, that hopefully that level of

communication to let you know about what

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these changes has happened and systems

and processes are being put in place

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because you've got those resources.

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'Cause if you don't have those, then you

might be the one sitting there going, "I

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didn't know any of this was happening,"

and the first time you're hearing

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about it is listening to this podcast.

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Darren : Yeah.

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No, that's true, and I know that there's

a lot of the accountants that are

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business advisors, they are all proactive

with their clients, getting them ready

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for the introduction of payday super.

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And if a business owner out there

is finding that they're not getting

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information from their accountant

or business advisor, maybe that's

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a trigger for them to seek out

an alternative advisor who will

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be able to make sure that their

compliance issues are all dealt with.

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Anthony: And that's all we have time for

in this episode, but I hope you found

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some value in Darren's advice on being

proactive with cash flow and understanding

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the personal risks directors face

regarding superannuation and insolvency.

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Before we go, I want to mention that

there is a workbook available for

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this episode of the podcast with

questions to ask yourself, as well as

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some key quotes and an action plan.

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Just head to the show notes and you'll

be able to download a copy from the link.

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Next time on IO and Insolvency

Options, we're going to take a look

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at a major shift coming to small

businesses as charging a separate

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fee for credit card payments is

set to be banned from October: 2026

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Darren discusses the controversial

impact of businesses being forced to

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absorb these transaction costs, the

potential for increased inflation,

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and why high transaction industries

like retail may be hit the hardest.

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Make sure you're subscribed

so you don't miss it.

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For details on how to get in touch

with Darren and his team on insolvency

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challenges, please consult the show notes.

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This podcast is produced by my

team at podcastdoneforyou.com.au,

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helping professionals share

their expertise through

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powerful podcast content.

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If you found value in today's episode,

please like, comment and subscribe

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to IO and Insolvency Options.

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Until next time, remember, there's always

a way forward when you know your options