New, as of this financial year, is the Super Stream payment system for employers to pay employees superannuation.
The reason it has been introduced is so that there are now measureable ways to ensure employers are paying their employees superannuation the correct amount, and on time.
Now, I get the fact that there are employers who either pay their employees super late or don’t pay it at all.
What I don’t get is all the BS that all employers now have to go through to set this crap up.
Normally, an employer pays their staff directly into their super accounts. This needs to be paid generally on the 28th of the next month after the end of the quarter. E.g. for the January to March quarter, the super payment is due by April 28th.
And a day or so later, the money is in the account.
The new system means that employers now must pay the money into a registered clearing house. This clearing house then pays each fund on the due date. It makes sense for the government to use a system like this as the clearing houses are a registered entity that can instantly report to the government or the ATO about who, and more importantly who hasn’t been paid.
That part is good.
But, it’s not just employers who will suffer here with all the extra effort to set up and ongoing extra time, to make these transactions happen. The employees suffer here too.
Some clearing houses state that the super payments may take up to 6 weeks to process.
Why?
How in a world of technology, where millions of payments can be made in seconds, would it take up to 6 weeks for transfers to occur?
Now that said, some clearing houses say they make transfers every 4 days or so. But really? How is even that acceptable?
I will tell you why – it’s so the clearing houses (generally fund managers) can invest that money and profit from this.
The same reason it takes between 3-5 days to clear a cheque. The banks invest this money and profit from it.
So, whilst those funds are not in your account for another 6 weeks means you are not earning anything from the normally invested funds.
Now 6 weeks may not sound like much, but that’s 12% earning potential your fund will never earn.
And those who have SMSF’s and loans within – well it means you need to hold extra cash in your account to make an extra repayment or two on your loan.
That’s HUGE!!!
But the plot thickens – under new legislation being introduced by Scott Morrison, super funds have a cap on the extra amount of funds a person can put into their super fund. Now, let me explain…
Post tax you are allowed a lifetime maximum contribution of $500k that you can put into super. People getting closer to retirement may sell their home and downsize and put the extra funds into their super. Benefits them immensely, except for the cap of $500k.
Let’s say your employer makes your super payment on June 30. The payment is registered within the company, to you as the employee, in that financial year. Now the funds wont be received by you until the next financial year.
So, let’s say you make the maximum contributions within this financial year without calculating the payment from last year into this years figures.
You then, the employee, will be taxed at the maximum tax rate of 49% on the extra contributions. Yes half – and unknowingly!
This amount then also goes towards your lifetime maximum extra contributions ($500k) that can be made.
Sounds like a massive government oversight to me!
I wonder if the government will go back and review this before passing it as legislation?
Enough whining – how could have it been done better?
The super accounts for everyone could have certain BSB numbers for each fund manager and the same for SMSF. I’m sure they probably already do.
Then every person has a unique account number, irrespective of the BSB, this account number becomes your identifier. A bit like a Tax File Number TFN.
Then each quarter every fund manager and bank must send a report to the ATO about who and who hasn’t received their super. This could easily be cross referenced to the employees compulsory super contributions that the employer was required to make. One algorithm!
The fund managers could very quickly investigate any dormant funds to see if that person has changed jobs and super funds or is deceased etc and make appropriate steps to roll over the funds together.
WOW – was it that HARD???
Then we wouldn’t have 40 zillion unused super accounts just getting eaten away by fees. It’s not rocket science…
So, sorry employees, you are about to have even less in your super balances for when you retire!