Tax Alert - Payday Super laws will start from 1 July 2026
Payday Super laws will start from 1 July 2026
Payday Super reforms have now received Royal Assent and is now law. The new legislation will require the payment of eligible superannuation guarantee (SG) contributions to be in line with the frequency of the employer’s pay cycle, effective from 1 July 2026.
The payday super changes will require employers to remit SG contributions at the same time they pay employees’ salary and wages (known as ‘ordinary time earnings’ or OTE). Currently SG contributions are required to be paid quarterly.
These changes will apply to all employers, whether have pay cycles weekly, fortnightly, monthly or irregularly. SG contributions must generally arrive in an employee’s chosen super fund within seven business days of each payday.
The motivation for these changes is to identify unpaid super much sooner, and reduce unpaid SG by aligning timing and increasing transparency.
What are the changes that Employers need to be aware of?
| Same day payment | SG must be paid to the employee’s super fund on the same day OTE is paid to employee. |
|---|---|
| Timing for payments | Employers must calculate SG for each pay cycle and make contributions that reach the employee’s fund within seven business days after the pay cycle day. |
| Imposing SG charge | If contributions are not received in time, the employer will have a SG shortfall and will be liable for the SG charge, including interest and administrative penalties. There are limited exceptions and short grace periods for newly engaged employees and some irregular payments. Notional earnings will accrue on unpaid SG to compensate the employee for lost superannuation earnings. Note the SG charge will be calculated on OTE, not on salary, aligning it with the basis for calculating underpaid super. |
| Imposing penalties | When an amount of SG charge is unpaid 28 days after it becomes due and payable, the ATO is required to give the employer a written notice to pay a specified amount of SG charge that is unpaid at that time. The employer will become liable to pay a penalty if they do not pay the amount in the notice in full within 28 days of the notice being issued. The penalty is equal to 25% of the outstanding amount (or 50% for certain repeat cases within the previous 24 months). The penalty cannot be remitted and does not accrue a general interest change. |
| SG statement changes | Employers will no longer use an SG statement for underpaid SG; instead, voluntary disclosure can be used to reduce the administrative uplift. |
| Tax treatment | On-time payments, late payments and any SG charge will be deductible. |
What steps can Employers take before 1 July 2026?
Although not yet law, there are steps which can be taken now by employers to prepare for the changes and be in the best position to be ready for 1 July 2026. This includes:
- Consider starting to make superannuation payments more frequently.
- Confirming that employees’ superannuation fund details are up to date.
- Reviewing internal processes around superannuation reporting.
- Starting to look for alternatives, if the employer currently using the ATO’s Small Business Super Clearing House (SBSCH), as this will close from 30 June 2026.
- Reviewing cash flow to understand how moving to paying superannuation more frequently may impact the business.
Employers are urged to check if their existing payroll or accounting software already includes super payment functionality, otherwise they should look for options from super funds or digital service providers offering payroll services, software or commercial clearing houses (other than SBSCH). We note that both Xero and MYOB have automatic superannuation contribution functionality in their payroll software and do not need an external clearing house.
The ATO is working closely with tax professionals, digital service providers and superannuation funds to help prepare small business employers for the 1 July 2026 start date.
What are the benefits for Employees?
The motivation for these changes is to identify unpaid super much sooner, and reduce unpaid SG by aligning timing and increasing transparency.
Payday super will reduce the time between when income is earned and when it is invested into the employee’s superannuation fund, giving employees earlier exposure to compound returns and reducing the incidence of “super theft” where employer contributions are delayed or missed and harder to detect.
Overall, more frequently contributions are expected to increase retirement balances materially over decades for many, particularly for younger employees.
Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.
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