Beginning July 1, 2026, the 'Super on Payday' initiative will mandate employers to pay superannuation contributions concurrently with regular wages. This move aims to streamline the process, allowing workers to monitor their super more effectively and safeguard their entitlements against potential company insolvencies.
The shift to more frequent super payments is projected to significantly boost retirement savings. Young workers stand to gain the most, as the power of compounding interest works in their favour over a longer period.
However, the recent superannuation changes are poised to create waves across the business landscape, particularly concerning cash flow management. While these reforms aim to bolster retirement savings for employees, they also carry implications for businesses that must be navigated with care.
The shift to paying superannuation contributions on payday, slated for July 1, 2026, means that businesses, particularly those in the Labour Hire and Recruitment industries plus those that pay employees weekly, will need to allocate funds more frequently⁴. In conjunction with the increase in the super guarantee rate to 12% by 2025, this could pose a challenge for businesses with tight budgets, as they must ensure that sufficient cash is on hand to meet these obligations³. While this is a positive step for employees' futures, it will necessitate careful financial planning from businesses to accommodate the higher outlay without disrupting their cash flow².
To mitigate the impact on cash flow, businesses may need to reassess their financial models and consider strategies such as improving receivables, optimising inventory management, and reviewing payment terms with suppliers and customers.
To help bridge the cash flow gap that may arise from the new superannuation payment changes, businesses can consider several types of cash flow lending products. Here are some options that could be suitable:
∙Short-Term Loans: These loans can provide a quick influx of capital to cover immediate superannuation payments. They're typically easy to apply for and can be repaid over a short period.
∙Lines of Credit: A flexible option that allows businesses to draw funds as needed up to a certain limit. This can be particularly useful for managing fluctuating cash flow needs due to the more frequent super payments.
∙Debtor Financing: This allows businesses to borrow money against the amounts due from customers, providing immediate working capital to meet super obligations without waiting for invoice payments.
∙Trade Finance: For businesses involved in importing or exporting, trade finance can offer the necessary funds to cover the gap between shipping goods and receiving payment.
∙Asset-Based Lending: Businesses can leverage their assets, such as property or equipment, to secure a loan, which can then be used to manage superannuation contributions.
Each of these products has its own set of benefits and considerations, and the right choice will depend on the specific needs and circumstances of the business. To find out more about the cashflow gap and how the above products can help bridge, check out our short video here.
Remember, while these lending products can provide immediate relief, it's important to consider the long-term implications on the business's financial health and ensure that any borrowing aligns with the company's strategic financial planning.
The superannuation changes represent significant financial commitment for businesses. Employers must be proactive in adapting their cash flow management to ensure compliance while maintaining financial stability. As these changes come into effect, it will be crucial for businesses to stay informed and seek professional advice to navigate the evolving superannuation landscape successfully.
To find out more about how Moneytech can help, get in touch here.
This article is for information purposes only and does not constitute financial advice. You should speak to a qualified financial professional about your unique situation before making decisions about financial products.
Sources:
(2) The Impact of Superannuation on Small Businesses in Australia.https://www.moneyadviceblog.net/the-impact-of-superannuation-on-small-businesses-in-australia/
(3) How the Australian Budget Affects Small Businesses in 2024.https://seerfg.au/how-the-australian-budget-affects-small-businesses-in-2024/
(4) Super Insights 2024: Australian superannuation industry analysis. https://kpmg.com/au/en/home/insights/2024/05/australian-superannuation-industry-insights-analysis.html
