Payday Superannuation

Proposed reforms in payday Superannuation have now been passed and are scheduled to come into effect on 1 July 2026.

This will bring a change to the timing of when employers are required to make Superannuation Guarantee contributions. Here is what the changes will mean for your retirement savings, your business and your cash flow.

Under the current Superannuation Guarantee, employers are required to make superannuation contributions for their eligible employees, being at least 12% of the salary and wages paid to each eligible employee. If an employer does not pay or underpays superannuation by its due date, the employer is charged the Superannuation Guarantee Charge (SGC).

This consists of:

• Superannuation Guarantee shortfall (super guarantee calculated on the salary and wages including overtime and any choice liability capped at $500);
• Nominal interest of 10% per annum; and
• Administration fees of $20 per employee, per quarter.

The Introduction of Payday Superannuation

Instead of a quarterly superannuation contribution, employers will be required to pay superannuation at the same time as any salary and wages.

It is believed this change will address the ongoing late payments and underpayment of superannuation to employees. Unpaid superannuation can lead to a reduced retirement income, resulting in the possibility of delaying your retirement. Additionally, it has advantages for employers who do not comply with their Superannuation Guarantee obligations.

The most recent analyst from the ATO finds that the ‘SG gap’ (the difference between total SG that should have been paid, and the actual SGC paid) was 6.3% or $5.2 billion for the 2021-2022 financial year.

Now, in 2024, the Australian National Audit Office (ANAO) found that the ATO’s analysis indicated that SG non-compliance is “unevenly spread across employers” in multiple industries, but specifically greater for small businesses.

So, What Are The Changes?

The changes that we can expect, as below:

• Superannuation Payments With Each Pay Cycle

From 1 July 2026, employers will have to pay their employees’ superannuation guarantee payment at the same time as their salary and wages.

• Seven-Day Payment Window

Employers will have up to seven business days after payday to make the contribution. After that time, the employer will be liable for the SGC.

• Limited Exceptions

Exceptions apply for:

1. New Employees (who now have an extended payment period up to 20 business days to allow for onboarding); and
2. Exceptional circumstances, where the ATO determines exceptional circumstances (natural disasters or IT outages).

• Removal of Late Payment Offset

The late payments offset will no longer apply after 1 July 2026.

• Retirement of the Samll Business Super Clearing House

The Small Business Superannuation Clearing House (SBSCH) has closed for new users effective 1 October 2025, and will close altogether on 30 June 2026.

Continuing the contributions to payday is expected to close this gap, protect employees and improve overall transparency; however, there are differences in opinion about the change.

What Does This Mean For Employers?

Superannuation payments represent a significant operational change for (primarily) small and medium-sized enterprises (SMEs).

Businesses that managed their cash flow planning around the optional quarterly superannuation payments may really struggle with a shorter-turnaround.

MYOB’s submission to the Treasury’s consultation in 2025 warned that, potentially, up to a quarter of all businesses may be at risk of insolvency under a payday superannuation payment system. Similarly, Employment Hero advised that a tight cycle of cash flow could cause thousands of SMEs to be put at risk financially and possibly lead to job losses.

Some perspectives on payday superannuation make the point that it’s just deferred employee wages; thus, businesses should not rely on superannuation to meet short-term cash flow demands. The Senate Economics Committee had stated before that the SG entitlements should never be considered a cash flow option, without the employee’s consent.

Employers must now consider reviewing their payroll system, clearing house arrangements, and accounting for how they will comply with the new seven days to pay superannuation.

Superannuation Clearing Houses: What’s Changing?

A superannuation clearing house permits employers to make one collective payment, which is then paid to the employee’s individual super fund.

At the moment, the ATO’s Small Business Superannuation Clearing House (SBSCH) is the only approved clearing house, allowing businesses with 19 or fewer employees, or a turnover of less than $10 million per annum.

After 1 July 2026, provisions for approved clearing houses will be repealed within the framework of Payday Super. SBSCH will no longer exist after 1 July 2026, as it is not fit-for-purpose for payday super.

Industry bodies such as the IFPA and Financial Services Council (FSC) have requested new regulations to ensure that third-party clearing houses remit SG contributions to the ATO within the new timeframe, however, these recommendations have not yet been adopted.

Key Technical Changes and New Features

• Deductibility of Late Contributions

Currently, late SG contributions and SGC amounts do not receive tax-deductibility.

Section 92 of Schedule 1 to the Main Bill will repeal sections 290-95 of the Income Tax Assessment Act of 1997, resulting in these contributions receiving tax-deductibility. Even so, penalties for the late contributions and general interest charge (GIC) will not be tax-deductible.

• Notional Earnings

A brand new, “notional earnings” section will now replace the current concept of nominal interest. If an employer pays contributions late, “notional earnings” will accrue daily on any outstanding SG amounts at an earning rate of GIC (currently approximately 10.61% p.a) until an employee contribution has been made, or until the ATO has issued a subsequent assessment. It ensures that employees are compensated for the delay in payment.

• Choice Loading

Employers that do not comply will incur a choice loading penalty, which has now reset to 25% of unremitted SG contributions, and the cap is increasing from $500 to $1,200 per notice period.

• Administrative Uplift

The administrative uplift (currently $20 per employee per quarter for late contributions) is proposed to become percentage-based, at 60% of the total SG shortfall and notional earnings. If an employer voluntarily acts to correct the late payment, as described in the draft guidelines, the uplift may be mitigated.

Next Steps?

The ATO will review and consult on its compliance approach 12 months after the commencement of Payday Super on 1 July 2026, distinguishing between high and low-risk employers.

However, employers should begin preparing now for the upcoming changes by:

• Integrating Payday super contributions into payroll software systems;
• Informing bookkeeping and accounting teams about the new compliance schedule;
• Reviewing and adjusting cash flow management processes; and
• Ensuring finance and HR teams are aware of the new reporting and payment obligations.

If you’re feeling overwhelmed by these upcoming changes, you’re not alone. Get in touch with our team, and we can walk you through the changes and how this is going to impact you and your business, and we can take it one step at a time to ensure you get it right from the start.