Payroll officers at the more than 800,000 Australian employers required to make superannuation contributions on behalf of their employees are about to get very busy.
From June 30 next year, the federal government is mandating that all businesses employing 20 or more people must deliver their superannuation payments electronically under a common set of standards, known as the SuperStream initiative. SMEs with 19 employees or less will have an extra year’s grace.
Depending on the size of your business and the number of staff you employ, transitioning your systems to be SuperStream compliant could take months -- so it pays to start planning for the transition now.
What’s the big deal?
Chief technical officer at specialist HR and payroll consulting company Presence of IT Shaun Flannery says the SuperStream initiative is basically designed to bring the industry into the 21st century.
“I equate it to the banking system,” Flannery says. “We’ve been able to do Electronic Funds Transfers (EFT) for years but for superannuation a lot of companies still rely on the old cheques, so it’s designed to streamline that whole process.”
The key change is that payment data sent to superannuation funds must now also be linked with employees’ membership data.
To facilitate this, every superannuation fund in Australia has been given a Unique Superannuation Identifier (USI). This means employers will have to collect the USIs for each individual employee’s superannuation fund and input these numbers into their payroll systems.
What’s in it for me?
A more streamlined superannuation industry should bring benefits to employers, employees, superannuation funds and the taxpayer-funded ATO alike.
Faster electronic payment systems mean that a contribution can reach a fund more quickly and therefore accrue more interest.
And because the SuperStream process is automated, any changes to an employee’s superannuation fund – e.g. a fund closes and an employee is put into a new super fund with a new USI – will be updated in payroll systems automatically, so employers won’t have to chase up forms to change data manually on their systems.
Can I do it myself?
Flannery says for employers with a strong comprehension of superannuation processes and the new legislation, it is possible to set up new payroll processes in-house. However, employing a third party to navigate the complexities will make things easier.
Part of the difficulty in getting up to speed lies in the long grace period given to the superannuation industry. Superannuation funds were originally mandated to be compliant on July 1 this year but were recently granted an extension to July 1 2015.
“What that gives us is a much more difficult environment for employers, because now they don’t know which funds are compliant and which funds aren’t, and which therefore can’t process transactions to the SuperStream standard,” says Robin Beauchamp, chief executive of ClickSuper, one of the superannuation ‘gateways’ that handles all that data going between businesses and super funds.
“It’s a very confusing landscape for employers which to be honest pushes the market further towards a ‘clearing house’ solution … rather than pushing them towards their own solution.”
Beauchamp lands the blame squarely at the superannuation funds, saying that they have known about the changes for three years. “This is not an overnight surprise, they’ve been acting in concert to attempt to delay its implementation and they’ve managed to achieve it,” he says.
ClickSuper and Presence of IT recently forged a partnership to help businesses navigate this “messy” situation, and other providers -- such as SMSF software provider BGL and Australia Post in its capacity as a gateway and payments service -- have already gone the same way. Default industry funds are also teaming up with clearing houses, such as HESTA’s partnership with Westpac’s QuickSuper, while others already offer their own clearing house solutions.
Small businesses with staff of 19 or less can also take advantage of the free, government-funded Small Business Superannuation Clearing House.
The deadline’s a year away, what’s the hurry?
Presence of IT’s Flannery says while super funds and payroll providers are aware of the changes after much hammering from the ATO, many businesses aren’t yet clued up. And, depending on the size of your company, taking steps towards compliance could take months.
Businesses will need to communicate with their payroll systems providers to ensure a field for the USI and other relevant data are now included as part of the payroll process. The USIs themselves must also be collected from every employee.
“If you’re talking 2000 employees then that’s a process that takes a while,” Flannery says. “If you’re talking 20,000 or more -- which some of our customers have -- that’s a serious project to get all the data collected. Then you need to set up the process with your gateway … so it’s not a process that for a large employer’s going to take a couple of weeks -- definitely a few months.”
And if that’s not motivation enough, the ATO has the power to enforce penalties for businesses that aren’t fully compliant by the relevant cut-off. While the department has said it will “provide flexibility and support to employers making a genuine attempt to comply with their obligations under SuperStream”, no employer wants the extra hassle of having to explain themselves to the tax office.