A significant shift in the administration of the superannuation guarantee (SG) is set to take place, introducing what is known as payday super. This change, aimed at improving the efficiency of super payments, will impose new obligations on employers starting 1 July 2026. Here’s what you need to know about the upcoming changes.

What’s Changing?

Under the new system, employers will be required to pay their employees’ SG contributions on the same day as salary and wages, a departure from the current practice of quarterly payments. This adjustment will help reduce the estimated AUD 3.4 billion gap between the super payments employees are entitled to and the actual contributions made. In addition, the government believes that this will improve employees’ retirement benefits. It is estimated that for a 25-year-old employee with an average income, if pensions are paid with wages instead of quarterly, their pension amount will increase by about 1.5% by the time they retire.

The announcement was made in the 2023-24 Federal Budget, though the payday super is not yet legislated. In anticipation of the changes, the Treasury has released a fact sheet to help employers prepare for the new requirements.

How Will Payday Super Work?

Under this new system, SG payments will be due within seven days after employees receive their ordinary time earnings (OTE). This means that employers must transfer SG contributions to employees’ super funds within a week of each payday. Some exceptions will apply, such as for new employees during their first two weeks of employment and small, irregular payments outside the usual pay cycle.

Many employers have already transitioned to Single Touch Payroll (STP) reporting, which electronically tracks employee wages. It is expected that payday super will integrate with these existing systems, with some minor adjustments to ensure OTE data is captured for super contributions.

Impact on Employers

The key challenge for many employers will not necessarily be the administrative burden but rather the impact on cash flow. Under the current system, businesses hold onto 12% of their payroll for up to 28 days after the quarter ends before paying SG. Under payday super, this money will need to be disbursed as soon as employees are paid, which could pose cashflow issues for some businesses. However, this change is expected to limit the risks of unpaid super, particularly in cases where a business becomes insolvent.

Consequences for Late Payments

Penalties for late or missed SG payments are already severe and will remain stringent under payday super. Currently, late payments trigger the superannuation guarantee charge (SGC), which consists of the unpaid SG amount, 10% annual interest starting from the quarter it was due, and a $20 administration fee per employee. Notably, these SGC amounts are non-deductible for the employer, even when settled.

Under the new payday super regime, penalties will become stricter, especially for repeated violations. If an employer fails to make SG payments on time, the following penalties will apply:

• Outstanding SG shortfall: Based on OTE (ordinary time earnings) rather than total wages.
• Notional earnings: Daily interest charged on the shortfall amount from the day after the due date, at the general interest charge rate.
• Administrative uplift: A penalty of up to 60% of the SG shortfall to cover enforcement costs, reduced if the employer voluntarily discloses the failure.
• General interest charge: Interest on any unpaid SG shortfall and notional earnings, plus any outstanding administrative penalties.
• SG charge penalty: Additional penalties of up to 50% of the unpaid SG charge if the debt is not cleared within 28 days of receiving the notice of assessment.

These penalties can quickly escalate, particularly for employers who have consistently underpaid or misclassified employees as contractors, leaving outstanding SG obligations. The new system will make such oversights costly. However, unlike the current SGC, under payday super, the SGC will become tax-deductible—excluding any penalties and interest accrued if the SG charge is not paid within 28 days.

Though not yet enacted, payday super represents a significant shift in the way superannuation is managed and paid. Employers will need to prepare for the upcoming changes and ensure they meet their new obligations once the law is finalized. Keep an eye on updates as the policy evolves to ensure compliance and avoid costly penalties.

Pitt Martin Group is a CPA accounting firm, providing services including taxation, accounting, business consulting, self-managed superannuation funds, auditing and mortgage & finance. We spend hundreds of hours each year on training and researching new tax laws to ensure our clients can maximize legitimate tax benefit. Our contact information are phone +61292213345 or email info@pittmartingroup.com.au. Pitt Martin Group is located in the convenient transportation hub of Sydney’s central business district. Our honours include the 2018 CPA NSW President’s Award for Excellence, the 2020 Australian Small Business Champion Award Finalist, the 2021 Australia’s well-known media ‘Accountants Daily’ the Accounting Firm of the Year Award Finalist and the 2022 Start-up Firm of the Year Award Finalist, and the 2023 Hong Kong-Australia Business Association Business Award Finalist.

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By Yvonne Shao @ Pitt Martin Tax