The federal government has introduced legislation into Parliament that will fundamentally change how Australia’s super guarantee (SG) system is administered.
Payday Super is a significant shift from the current SG system where employers have until 28 days after the end of each quarter to make SG payments.
From 1 July 2026, the SG payment will need to be in the employee’s superannuation fund within seven business days (7) of ‘payday’.
The intent of Payday Super is to reduce the estimated $5.2 billion gap between what is owed to employees and what has been paid but is also expected to improve outcomes for workers - Treasury estimates that a 25‑year‑old median income earner currently receiving super quarterly and wages fortnightly could be around 1.5% better off at retirement ($6,000).
Treasury Laws Amendment (Payday Superannuation) Bill 2025 and the Superannuation Guarantee Charge Amendment Bill 2025 are not yet law and we will bring you more once the legislation passes Parliament.
Impact on employers
1 July 2026 is a hard date – the reform will require an economy wide transition and all employers are expected to be compliant from this date.
The major impacts will be on cashflow and administration.
From a cashflow perspective, employers will not be holding 12% of their payroll until 28 days after the end of the quarter, but instead paying this amount out within 7 business days of the employee’s payday.
Administratively, your payroll software provider will accommodate the change. Single touch payroll will report both employee earnings and superannuation liability.
Payday super changes the timing of SG payments and enforcement, but aside from changing some of the terms, the overall concept of SG remains very similar – who you pay SG to, the amount, and what you pay SG on, are generally consistent.
The big question for most employers is what qualifies as a ‘payday’? The legislation introduces a new concept of ‘qualifying earnings’, which for practical purposes replaces ‘salary and wages’.
A ‘qualified earning’ (QE) is:
- Ordinary times earnings (OTE) - the gross amount your employees earn for their ordinary hours of work including over-award payments, commissions, shift loading, annual leave loading and some allowances and bonuses; AND
- Salary sacrifice superannuation contributions - amounts of OTE that have been sacrificed in exchange for an additional superannuation contribution under a salary sacrifice arrangement; AND
- Other amounts currently included in an employee's salary or wages for SG - payments that were expressly included within ‘salary or wages’ under the old law for arrangements that fall within the extended meaning of employee for the SGA Act.
SG is calculated on the employee’s qualifying earnings. The day on which a qualified earning is made, is the day that the employer is liable for the SG payment. If this payment is not received by the employee’s fund within 7 working days of the qualified earning being made, then a superannuation guarantee charge is likely to apply.
What happens if SG is late?
The timing of SG payments and late payments looks like this:
The 7 business day payment requirement and extended periods
For an SG payment to be received by the super fund, the super fund must be able to allocate the payment. If the fund is unable to allocate the payment, for example because of incorrect details, then the payment has not been received. The deadline for super funds to allocate or return contributions has been reduced from 20 to 3 days.
There are extended payment periods for SG payments for:
- First time SG payments to new employees.
- Where an existing employee changes their superannuation fund.
- Some out-of-cycle payments which might include commissions, bonuses, payments in advance, and back payments (the ATO will provide more definitive details).
- Some exceptional circumstances as determined by the Commissioner (for example, where some employers face natural disasters).
In these cases, employers must make the first SG payment within 20 business days of a QE payment. If the next SG payment due date overlaps the 20 days, then the second payment has the same due by date as the first payment.
What is the SG charge?
The SG charge applies when the Commissioner assesses that there was a shortfall owing. Payment of the SG charge is due on the day of the Commissioner’s assessment and interest accrues each day the payment is owing.
Employers can reduce the impact of late SG payments by:
- Making an overdue payment in the late period (the time between when the SG payment was due and the Commissioner’s assessment); and
- Lodging a voluntary disclosure.
SG charge is made up of:
- Individual final SG shortfall - any employee SG contributions that remain unpaid when the SGC is assessed by the Commissioner.
- Notional earnings – a daily interest component to compensate employees for the days the payment was late (the general interest charge is currently 10.61%, or 0.02906849% per day)
- Administrative uplift – 60% of the sum of the final SG shortfalls and individual notional earnings components on the qualified earnings day.
- Choice loading – 25% of the value of contributions where an employer does not comply with the choice of fund rules.
- Late payment penalty - If SG charge remains unpaid 28 days after it is assessed, the ATO will issue the employer with a notice to pay. If the payment is not made within 28 days, a penalty will apply of 25% of the outstanding amount, or 50% of the outstanding amount if the employer has previously been liable for the penalty in the previous 24 months.
The SG charge is tax-deductible.
Late SG payments can spiral out of control quickly. This will be a particular issue for employers that pay employees less than their entitlements over time or have misclassified employees as contractors and have an outstanding SG obligation.
Keep in mind that a director of a company that fails to meet its SG charge liability in full by the due date automatically becomes personally liable for a penalty equal to the unpaid amount.
Change for high income employees
Under current law, employers are not obliged (unless by contract) to pay SG for employees that earn over a certain limit (currently $62,500 per quarter). Under Payday Super, the maximum superannuation contribution base will move from a quarterly to an indexed annual threshold.
For employers who do not pay SG to employees who exceed the maximum each quarter, the annual threshold will smooth out payments across the year. For example, if an employee exceeded the quarterly threshold only because of a one-off bonus, this bonus will be included in the annual cap. If the employee’s qualified earnings for the year are below the threshold, SG will apply until the employee exceeds the annual cap.
Decommissioning of Small Business Superannuation Clearing House
The Small Business Superannuation Clearing House will be retired from 1 July 2026 – the clearing house closed to new users on 1 October 2025. Employers currently utilising the clearing house will need to transition to a commercial payroll solution.
Impact on employees
For workers, the change means superannuation will flow into their accounts throughout the year rather than in quarterly instalments, allowing their retirement savings to start earning returns sooner. While the benefit of interest savings is a bonus, the real benefit of Payday Super is its protection against under and non-payment.
The reforms will also help the ATO more quickly identify employers not making contributions. Currently, over a third of outstanding super debt is owed by insolvent businesses, partly because unpaid super is being picked up too late – the ATO investigates almost two years of potential unpaid super on average when responding to employee complaints.
ATO compliance in the first year
The ATO have issued a practical compliance guideline for how they will manage the first year of Payday Super (PCG 2025/D5).
The guideline sets out employer risk zones, with compliance efforts concentrating on employers who fail to make SG payments within 7 business days. High risk cases (red zone) are those with one or more individual final SG shortfalls greater than nil by 28 days after the end of the quarter in which the qualifying earnings were paid.
In general, the ATO will be looking to ensure that the pattern of SG payments is consistent with the Payday Super regime from 1 July 2026.
Need assistance?
The legislation is not yet law. We’ll let you know once it has passed Parliament.
Until 1 July 2026, it is a good idea to review your business's SG process ensuring that everyone who should be paid SG is being paid – for example, working directors and some contractors.
If you need assistance to review your SG obligations and practice, or are concerned about the impact on cashflow, please contact the Hayes Knight team for assistance.
