The introduction of ‘payday super’ marks a significant shift in how superannuation guarantee (SG) payments will be managed in Australia. Here’s an overview of what’s changing and the implications for employers.
What Is Payday Super?
From 1 July 2026, employers will be required to pay SG contributions to employees’ super funds on the same day as wages and salaries are paid, replacing the current quarterly payment system.
Why the Change?
The Government aims to:
- Reduce the estimated $3.4 billion gap between owed and paid SG contributions.
- Improve long-term outcomes for employees. For example, a 25-year-old median income earner could be around 1.5% better off at retirement by receiving super contributions in line with their wages.
Although announced in the 2023–24 Federal Budget, payday super is not yet law. However, Treasury has released guidance to help employers prepare for this major change.
How Will Payday Super Work?
Under payday super:
- Employers must pay SG within seven days of an employee’s payday.
- Exceptions apply to:
- New employees, where SG is due after the first two weeks of employment.
- Small or irregular payments made outside the normal pay cycle.
Most employers will integrate SG payments into existing Single Touch Payroll (STP) systems. Adjustments will be made to STP to ensure ordinary times earnings (OTE) data is collected.
Impact on Employers
The shift to payday super changes cash flow management significantly. Employers will no longer hold 12% of their payroll until the end of the quarter but must instead pay SG on payday. While this reduces risks related to unpaid SG in cases of insolvency, it may create short-term cash flow challenges for some businesses.
What Happens If SG Is Paid Late?
The penalties for late or unpaid SG are strict and are set to become even more punitive under payday super. Here’s what happens if SG is paid late:
Current Penalties
- Super Guarantee Charge (SGC): Includes the unpaid SG shortfall, 10% interest per annum, and a $20 administration fee per employee per quarter.
- Non-Deductibility: Unlike regular SG contributions, the SGC is not tax deductible for employers
Proposed Penalties Under Payday Super
If the new rules become law:
- Outstanding SG Shortfall: Based on OTE rather than total salaries and wages.
- Notional Earnings: Daily compounding interest on the shortfall amount at the general interest charge rate.
- Administrative Uplift: A penalty of up to 60% of the SG shortfall, reduced if the employer voluntarily discloses non-compliance.
- General Interest Charge: Interest on unpaid SG shortfalls, notional earnings, and administrative uplift amounts.
- SG Charge Penalty: Additional penalties of up to 50% of the unpaid SGC if the amount remains unpaid within 28 days of an assessment notice.
Unlike the current system, the new SGC will allow employers to claim tax deductions on SG shortfalls (excluding penalties and interest incurred after 28 days).
What Should Employers Do?
Although payday super is not yet law, employers should start preparing for its implementation:
- Understand Your Obligations: Familiarise yourself with the proposed rules, especially how SG payments will integrate with your payroll systems.
- Evaluate Cash Flow: Assess how the shift to same-day SG payments will affect your cash flow and plan accordingly.
- Stay Informed: Keep up to date with legislative developments and guidance from Treasury.
What Are Ordinary Time Earnings (OTE)?
Ordinary time earnings are the gross amount employees earn for their standard hours of work. This includes:
- Over-award payments.
- Commissions and shift loadings.
- Annual leave loading.
- Certain allowances and bonuses.
We’ll keep you updated on the progress of payday super legislation and help you adapt your systems to meet compliance requirements. For tailored advice on managing these changes, reach out to our team today.
