Understanding Payday Super: What Employers Need to Know

The Australian Government is introducing significant changes to the Superannuation Guarantee (SG) system through the Payday Super reform, set to take effect from 1 July 2026. This change aligns SG contributions with employees’ wages rather than the current quarterly requirement.

For employers, this shift aims to improve compliance, streamline payroll processes, and reduce the risk of accumulating large super liabilities. Here’s what you need to know to prepare for the transition.

Why is Payday Super Being Introduced?

Currently, many employees are missing out on their rightful super due to delayed payments or non-compliance by employers. This measure seeks to:

• Prevent superannuation underpayment and non-payment, often described as wage theft.
• Help employees accumulate higher retirement savings by receiving super more frequently.
• Improve employer payroll management by reducing large quarterly liabilities.
• Strengthen compliance by allowing the Australian Taxation Office (ATO) to act more swiftly on unpaid super cases.

Key Changes for Employers

1. SG Payments Must Align with Payday
   • From 1 July 2026, employers must pay super contributions on payday instead of quarterly.
   • The super payment must be received by employees’ super funds within 7 calendar days of payday.
2. Superannuation Guarantee Charge (SG Charge) Updates
   Employers who fail to pay super on time will be subject to an updated SG charge, including:
   • Outstanding SG shortfall: Calculated based on Ordinary Time Earnings (OTE), ensuring employees receive their full entitlements.
   • Notional Earnings Interest: Daily interest will accrue at the general interest charge rate (currently 11.36% as of Q3 2024).
   • Administrative Uplift: A penalty of up to 60% of the unpaid SG, which is reduced if the employer voluntarily discloses non-compliance.
   • Additional penalties: Employers failing to pay within 28 days of the ATO’s notice of assessment may face penalties up to 50% of the unpaid SG charge.
3. Recognizing Late Contributions
   • If SG contributions are not received by the due date, the employer will immediately be liable for a SG charge.
   • Late contributions will automatically count toward the earliest outstanding payday, eliminating the need for employer elections.

How Employers Can Prepare

To ensure compliance and smooth payroll operations, employers should:

• Upgrade Payroll Systems: Ensure payroll software is set up to handle payday super payments.
• Train Payroll Staff: Educate payroll teams on the new requirements and payment timelines.
• Review Cash Flow Management: With SG payments becoming more frequent, businesses must plan for cash flow adjustments.
• Engage with Superannuation Funds: Ensure that superannuation fund details are up to date and contributions are processed correctly.
• Monitor ATO Guidance: Stay informed on legislative updates and ATO compliance requirements.

Transition Support for Employers

The Government is implementing support measures to assist businesses in adapting to Payday Super, including:

• Reduced Superannuation Fund Processing Time: Funds must allocate or return contributions within three business days (down from 20 days).
• Improvements to SuperStream Standards: Enhancing error messaging and enabling faster payment processing via the New Payments Platform.
• Retirement of the Small Business Superannuation Clearing House: Employers will need to transition to alternative, cost-effective payment solutions by 1 July 2026.
• Streamlined Employee Onboarding: Employers can now display an employee’s existing ‘stapled’ super fund during onboarding, reducing duplicate accounts.

ATO’s Role in Compliance and Enforcement

The ATO will have increased visibility of super contributions by leveraging Single Touch Payroll (STP) data. This will:

• Allow proactive identification of missing or late payments.
• Enable earlier intervention to prevent large unpaid SG amounts from accumulating.
• Place the responsibility on employers to ensure on-time payments.
• Provide employees with near-instant tracking of super payments.

Final Thoughts

The transition to Payday Super represents a significant shift for employers, but it also brings benefits such as streamlined payroll management and improved compliance. While it may require upfront adjustments in payroll systems and processes, the long-term advantages outweigh the challenges.

Employers should start preparing now to ensure they are ready for the 1 July 2026 deadline. Investing in payroll technology, staying informed about legislative updates, and maintaining open communication with super funds will be key to a successful transition.

For more information and updates, visit the ATO’s website or consult a payroll specialist to ensure full compliance with Payday Super requirements.

https://www.ato.gov.au/about-ato/new-legislation/in-detail/superannuation/payday-superannuation

https://employmenthero.com/blog/payday-super/

At Bespoke Payroll, we stand by our commitment to deliver cost effective, compliant and streamlined payroll functions for all business sizes. From basic implementations, through to fully managed and integrated systems, we’ve got you covered.

Don’t hesitate to reach out to one of our team to see how we can save you money through a solution tailored specific to your business.