The way superannuation is paid may be about to undergo a significant transformation. As part of the Labor government’s efforts to strengthen the system, the proposed “payday super” reforms would require employers to pay employees’ superannuation contributions within seven calendar days of every payday. With draft laws now released for comment and payday super intended to apply from 1 July 2026, it’s important to understand what this could mean for you.
According to the ATO, while most employers do the right thing by their employees, an estimated $5.2 billion in super went unpaid in 2021–2022. The change to payday super is designed to improve the management of super payments and simplify payroll arrangements, reduce unpaid super incidents, and ultimately enhance retirement savings for Australians. For example, the government estimates that aligning super payments with paydays means a 25-year-old who earns a median income, with wages paid fortnightly and super currently paid quarterly, could be around $6,000 better off at retirement.
Employers
For employers, transitioning to payday super represents a shift in administrative processes. Some key considerations:
- New payment timeframes: From 1 July 2026, you’d need to ensure super contributions reach your employees’ funds within seven calendar days of their payday, regardless of whether you pay weekly, fortnightly or monthly.
- New terminology: The draft legislation introduces “qualifying earnings” (QE) which equates to the current “ordinary time earnings base”. QE will be used to calculate both super contributions and any shortfall charges. Any shortfall charges are currently calculated using the larger salary and wages figure.
- Small Business Clearing House closure: The ATO’s Small Business Superannuation Clearing House (SBSCH) would close from 1 July 2026, so employers who use it would need to transition to suitable payroll software.
- Extended timeframes for specific situations: The legislation includes some flexibility for paying super to new employees, out-of-cycle payments and exceptional circumstances like natural disasters.
- Penalties and charges: The superannuation guarantee charge (SGC) would be redesigned to include components such as notional earnings (interest on unpaid super), administrative uplifts, and choice loadings for non-compliance with fund choice rules. Importantly, both on-time and late contributions would be tax-deductible, potentially offering some financial relief to employers.
Employees
For employees, payday super offers several potential benefits:
- More frequent contributions: Your super would be paid with each pay cycle rather than as infrequently as quarterly. This means your retirement savings may benefit from compound interest sooner.
- Better visibility: The alignment of super payments with your regular pay should make it easier to track whether your employer’s meeting their obligations.
- Improved protection: The new system includes stronger mechanisms to detect and address unpaid super, with employers facing increasing penalties for non-compliance.
- Fund processing times: Super funds would have stricter timeframes for processing contributions, with allocation deadlines reduced from 20 business days to just three business days.
What happens next?
The draft legislation is open for public comment until 11 April 2025, with introduction of final legislation dependent on the 3 May 2025 federal election outcome. Employers should prepare by:
- reviewing current payroll systems and processes;
- considering the cash flow implications of more frequent super payments; and
- finding alternatives to the SBSCH clearing house if needed.
The draft legislation may change after consultation and the election, so stay informed about developments in this important area of workplace compliance.
Source: Aust Govt - The Treasury - Payday Super - Exposure Draft