Tax Alert - Preparing your business for Payday Super changes starting 1 July 2026
Preparing your business for Payday Super changes starting 1 July 2026
From 1 July 2026, employers will have to pay their employees’ compulsory Superannuation Guarantee (SG) contributions at the same time as they pay their salary and wages (ie. ordinary time earnings, OTE). This is a change in the frequency of the payment rather than its calculation.
With less than six months remaining, we believe it is very important to start preparing your business for these changes. We will outline some actionable steps that can be taken now to help manage the process to be compliant with the new changes leading up to 1 July 2026.
These changes will apply to all Employers, whether they have pay cycles weekly, fortnightly, monthly or irregularly. SG contributions must generally arrive in an employee’s chosen super fund within 7 business days of each payday.
Please note that in November 2025 we released a Tax Alert after the payday super rules received Royal Assent and became law summarising the changes employers need to be aware of - to read
click here.
What actionable steps can Employers take (well) before 1 July 2026?
The following table provides some actionable steps which can be taken now to help with the transition toward making SG payments more frequently and being in the best position to be compliant with the new payday super rules before 1 July 2026.
| Actionable steps | What can an Employer do before 1 July 2026? |
|---|---|
| Consider starting to make SG payments more frequently | Run a pilot program where you make SG payments more frequent (ie. fortnightly rather than quarterly). Note that employees should be advised in advance about any changes. This may reveal operational gaps (ie. bank or super fund cut-offs, reconciliation mismatches) which could be fine-tuned before the 1 July start date. Any significant issues identified (in particular with your payroll software) can be reviewed and worked though with your software provider. |
| Confirm employees’ superannuation fund details are up to date | Perform a review and ask employees to confirm details of their Superfund’s: (i) name, (ii) Unique Superannuation Identifier (USI) and (iii) ABN. This will help confirm all employee Superfund details are up to date and correct any mismatched information. This review could be performed periodically (ie. every 1 or 2 years) to ensure details are accurate. |
| Review internal processes around superannuation reporting | Update payroll and accounting procedures to capture the new payday dates, OTE calculations, and reconciliation steps. Train payroll and bookkeeping staff on the new 7‑day payment rule and the ATO’s compliance expectations, to avoid non-compliance and penalties (as explained below). We note that the ATO has released various free webinars considering the payday super changes (see the link below this table). If you outsource payroll, contact your provider soon as many are already updating their systems and can help make a seamless switch. |
| If you use the ATO’s Small Business Super Clearing House (SBSCH), start looking for alternatives | The SBSCH will close from 30 June 2026. If you currently use the SBSCH, you will need to find an alternative. Once an alternative is found, make the switch over as soon as practicable and test making SG payments well before July 2026. Examples of SuperStream-compliant methods include: payroll software with an integrated clearing house (ie. Xero, MYOB, QuickBooks), a commercial clearing house (ie. offered by payroll vendors and some banks), or direct via your Bank (ie. use your bank’s BPAY/EFT options combined with SuperStream data and Payment Reference Numbers). |
| Review cash flow impact of making more frequent SG payments may impact the business | Shorter payment cycles can increase the frequency of cash outflows even if the annual total is unchanged, so ensure bank accounts and payment approvals are aligned to avoid payment delays. Consider practical mitigations such as aligning payroll and super payment dates and negotiating bank cut‑offs. |
| Payroll software updates and training | Most popular payroll systems (ie. Xero, MYOB, QuickBooks) already support payday-aligned super. Confirm your setup and check if any updates or integrations are needed well before July 2026. We note that while many software providers are working hard to get these changes ready, the ultimate compliance responsibility rests with the business/Employer, and this includes any penalties imposed for non-compliance (as explained below). Ensure software systems are updated and tested well before the start date on 1 July 2026. |
The ATO webinars can be found – click here.
Are there circumstances when SG payments can me paid more than 7 business days after payday?
To allow for the additional time it may take an Employer to onboard new employees and obtain the details of their superannuation fund to which contributions need to be made, Employers will have additional time to make SG contributions where it is their first payday with that Employer.
Employers will have an additional 20 business days (called the ‘extended usual period’) to make eligible contributions for new employees. The fund must receive the contribution before the end of the 20th business day after their first payday.
The ‘extended usual period’ (ie. additional 20 days) can also be available in special circumstances where the Employer and employee may have an existing relationship, including:
- Employee resigning from and rejoining the same employer under a new employment contract;
- Employee commences a new employment relationship with former employer under a new employment arrangement;
- An existing employee changes funds, rolling their balance from one fund to the other, where the employee provides a new choice of fund form; and
- An existing employee’s fund becomes non-compliant and the employee/Employer have to go through the choice of fund process.
Transitional period for SG payments made between 1 July 2026 and 28 July 2026
The payday super rules allow for a necessary transitional ‘grace period’ between 1 July 2026 and 28 July 2026, as there will be a period of overlap between the old and new laws.
Under the old law, employers have until the 28th day after the end of the quarter (ie. 28 July 2026) to make contributions to reduce their SG shortfall. However, from 1 July 2026 under the new payday super laws, SG payments must be received by the relevant super fund within 7 business days.
This transitional period allows a SG payment which is made in the period from 1 July 2026 to 28 July 2026 and could be counted for both the purposes of the old law and the new payday super laws, to be first applied under the old law, with any remainder then applied under the new law.
What are the implications of non-compliance for making SG payments on-time?
The Superannuation Guarantee Charge (SGC) framework has been amended so that Employers may face SGC liabilities plus interest and administrative penalties if contributions are not received within the required 7 business day timeframe for existing employees (or 20 business day timeframe for new employees).
Thus, it is critical for Employers are prepared to pay compulsory SG payments on time and maintain compliance with the SG rules (along with withholding and paying PAYGW). The PAYGW is tax being paid to the ATO on behalf of the employee. Compulsory SG payments are also amounts being paid for the benefit of the employee.
If SG payments are paid late, the SGC will apply, which requires the missed super amount to be paid plus interest and penalties. After SGC has been assessed, additional interest and penalties may also apply if the SGC liability is not paid in full.
| Components of the updated Superannuation Guarantee Charge |
|---|
| Outstanding SG shortfall | The SG shortfall will be calculated based on OTE to be consistent with the base used for calculating the SG. There are limited exceptions and short grace periods for newly engaged employees and some irregular payments. |
|---|---|
| Notional Earnings | Notional earnings will accrue from the due date of payment on unpaid SG to compensate the employee for lost superannuation earnings as a result of the Employer’s delay in paying minimum SG contributions. |
| Administrative uplift | An additional charge will be levied to reflect the cost of enforcement. This will be calculated as an uplift amount equal to 60% of the sum of the total of the Employer’s individual final SG shortfalls and notional earnings. |
As you can see the SGC rules are significant and designed to incentivise Employers to pay all SG payments on time on behalf of their employees.
What penalties will the ATO impose for non-payment of the SGC amount?
When an SGC amount 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 SGC that is unpaid at that time.
A general interest charge (GIC) rate will be applied on the unpaid SGC amount until it is paid in full, even after the notice to pay has been issued. This GIC will form part of the debt owed to the Commonwealth. The annual GIC rate is currently 10.61% (based on the Oct – Dec 2025 quarter).
The Employer may become liable for a ‘late payment penalty’ if they do not pay the amount in the notice in full within 28 days of the notice being issued. The penalty rate is equal to 25% of the outstanding amount (or 50% if an Employer has repeatedly made late SG payments within the previous 24 months).
The ATO must give written notice of the assessment of the ‘late payment penalty’ to the Employer, and the penalty cannot be remitted and does not accrue any GIC.
We note that these penalties are significant and substantial penalty amounts can accrue quickly if prompt action is not taken to rectify non-compliance.
Are late SG contributions, SGC amounts, GIC and ‘late payment penalties’ tax deductible?
When the payday super rules became law in November 2025, changes were made in relation to the tax deductibility of late contributions and any SGC amount to incentivise Employer’s to avoid instances of non-compliance.
Under the new framework, the following items will be tax deductible to the Employer:
- On-time SG contributions;
- Late SG contributions; and
- SGC amounts (which includes the three components in the table above: the outstanding SG shortfall, notional earnings and administration uplift).
However, any GIC or ‘late payment penalties’ related to a SGC amount will not be tax deductible to the Employer.
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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