Aussie cafe owner's 'pressure' of impending $124,000 superannuation change: 'Everyone's struggling'

Yahoo

7 days ago

An Australian cat cafe owner says the introduction of payday super will 'add another layer of stress' to his small business, which is already grappling with rising rents, wages and operating costs.
From July 1 next year, superannuation will be paid to employees at the same time as their salary and wages, rather than quarterly.
First announced in May 2023, the reform is aimed at tackling unpaid super and increasing the retirement savings of Aussies. The Australian Taxation Office (ATO) estimates that $5.2 billion worth of superannuation went unpaid in 2021-22, while the government found a 25-year-old whose super was switched from quarterly to fortnightly could be $6,000 better off at retirement.
Daniel McGowan runs the Lucky Cat Cafe in Ipswich and employs three part-time staff members. The 37-year-old told Yahoo Finance he was speaking with his accountant about how he can meet the upcoming superannuation requirements. He may have to reduce the hours of his staff and work behind the counter more himself to make sure he can juggle the added "pressure" on cashflow.
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'I need to have that cashflow right here and now to put into the business to go straight into superannuation,' he said.
'I don't think this is going to hurt staff in that they're going to get less hours. But it is a consideration now, and I've spoken to them about it."
McGowan said he generally doesn't pay himself a wage from his business, or pay himself superannuation, as he also works in digital marketing and teaches at a university.
McGowan recently closed his Annerley cafe and has now shifted operations over to his Ipswich store and is in the process of building it back up.
'The way it is now is every single week is a new experience of, 'Where am I going to get this money? How am I going to pay this? How am I going to pay that?' It is a big struggle,' he said.
McGowan said rent was his biggest expense, eating into between 60 to 70 per cent of revenue. This was followed by wages, with wages increasing on July 1 in line with minimum wage requirements and the super guarantee increasing to 12 per cent.
The cost of goods has also been rising, with coffee bean prices 'going up every single month". On top of that, McGowan said he had to close the shop for a week due to Cyclone Alfred earlier this year, and the shop experienced a break-in.
'I just think everyone's struggling, so a week of revenue is actually a really big thing in the scheme of things,' he said.
'Anyone who wants to give you credit or a loan, these small business loan companies, they want to give you very short-term loans.
'So you're getting in this cycle of having to get a 20-week turnaround loan, which is high interest, to cover the fall, and it's a lot of juggling.'
McGowan said he doesn't want to put up prices for customers at the cafe and cat lounge. He has been trying to keep prices steady for customers and absorb some of the small costs like alternative milk and EFTPOS fees.
Employment Hero, who runs payroll for more than 300,000 businesses, surveyed its customers and found 65 per cent of small and medium businesses thought payday super would have a 'moderate' to 'huge impact' on the day-to-day running of their businesses.
About a third said they would have to build up larger cash reserves to prepare for the change, while 15 per cent were not aware of the changes at all.
Employment Hero CEO Ben Thompson said he supported the intent of payday super and thought it presented a 'huge opportunity' for all Australians, but there were risks for businesses at play.
The company's modelling found businesses would need an extra $124,000 in working capital on average to meet the new rules. This is based on the average employer size and the average employee salary on its platform being paid 12 per cent of their salary in superannuation under the new timing requirements.
'That reduction in working capital could really push businesses to the edge of insolvency and put jobs at risk,' Thompson told Yahoo Finance.
'I think the problem here is more frequent payment of super is beneficial, but if it ultimately costs jobs, is it worth it?'
As part of the payday super change, employers will have a seven-calendar-day deadline from the payment of wages to pay employees' superannuation.
If they miss this deadline, they will be liable for an updated super guarantee charge, which will include the shortfall, daily interest (currently 10.78 per cent), and an extra enforcement charge of up to 60 per cent of the shortfall.
The Council of Small Business Organisations of Australia (COSBOA) said it supports the principle of payday super but has argued businesses need more time before enforcing a strict seven-day rule.
It called for a phased approach to payday super, moving to monthly payments from July 1, 2026, to allow time for system upgrades.
'Super payments move through multiple banking and clearing house stages before reaching super funds,' COSBOA Chair Matthew Addison said.
'At present, payments can take several business days to clear, and many transactions require additional time to reconcile.'
Thompson has called for the payment deadline to be extended to 10 days to accommodate the likelihood of bouncebacks. The company is also in the process of building superannuation payments into a payroll solution.
Other groups, like the Association of Superannuation Funds of Australia, have noted employers have known about the changes since 2023 and have had time to prepare.
McGowan said he feels like he should have started preparing for the July 1 deadline earlier, but ultimately understands why the hard headline is in place.
'We're just gonna have to get it done,' he said.