Initially announced in the 2023-24 Federal Budget, Treasury has released draft policy design details on the Payday Super regime following consultation.
Recently, Treasury released draft details in relation to the implementation of the Payday Super regime. The proposed measures effectively seek to ensure that Superannuation Guarantee (“SG”) contributions are remitted at the same time as salary and wages are paid to employees. Currently, employers are only required to make SG contributions in relation to their employees on a quarterly basis.
The proposed Payday Super regime has been publicised as an enhancement to the superannuation system for both employees and employers. Employees are empowered to track their superannuation entitlements more effectively and hold employers accountable for any underpayments or late payments, while employers are presented with opportunities to implement smoother payroll management processes through streamlined administrative tasks.
The new rules are expected to take effect from 1 July 2026.
Overview of proposed changes
Where employers fail to provide SG contributions on a timely basis, they are liable to an SG charge. In addition to the shortfall in SG contribution, the charge also includes interest and administrative components designed to compensate employees for lost earnings and the ATO for allocating the funds to the employees’ superannuation fund accounts.
Under the proposed reform Treasury seeks to legislatively define the term ‘payday’, being the date that an employer makes an Ordinary Time Earnings (“OTE”) payment to an employee.
Other proposed changes have been summarised in the below comparison table.
| Current rules | Proposed measures |
| SG contributions are due to the employees’ superannuation fund accounts 28 days after the end of the quarter. | Introduction of a new 7-day ‘due date’ for contributions to arrive in the employees’ superannuation fund accounts, which takes into account the movement of funds through the payment system, including superannuation-specific clearing houses.
Deferral of ‘due date’ is available for new employees along with small and irregular payments outside ordinary pay cycle.
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| The interest component of the SG charge is set at 10% per annum. | The SG shortfall will incur General Interest Charge on a compounding basis (11.36% for the July – September 2024 quarter).
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| The administrative component of the SG charge is set at $20 per employee per quarter. | The administrative component of the SG charge will be calculated as an uplift of up to 60% of the SG shortfall.
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| The SG charge is currently not deductible for income tax purposes.
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The SG charge will become tax deductible. |
| Failure to comply with legislation may result in additional penalties of up to 200% of the SG charge.
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The superannuation penalty regime will be revised whereby additional penalties up to 50% of the SG charge will apply for non-compliance.
Penalties remain non-deductible.
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| The Small Business Superannuation Clearing House (“SBSCH”) is accessible by eligible employers. | The SBSCH will be retired from 1 July 2026, with the Government working with businesses on alternative solutions in the interim.
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| Employers have to elect for late payment offset to apply. | Late contributions will be automatically allocated towards the earliest possible payday with an outstanding SG shortfall.
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| Superannuation funds have 20 days to allocate SG contributions to employees’ superannuation fund accounts.
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Superannuation funds will have 3 days to allocate SG contributions to employees’ superannuation fund accounts.
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In addition, employers under the Payday Super regime will have the ability to show employees their stapled superannuation funds during the onboarding process. The Single Touch Payroll regime will also be adjusted to mandate reporting of OTEs and total superannuation liabilities for employees to identify SG contributions accurately.
Potential Impacts on business
While the details released by Treasury offered some insights into the Government’s objectives with respect to Payday Super, they do not address the challenges businesses face in terms of payroll governance and cashflow management, particularly for small and medium enterprises with the retirement of the SBSCH platform and the absence of transitional measures.
Businesses will also need to consider the following factors ahead of the proposed 1 July 2026 start date:
- Cash reserves ahead of, and during the early stages of, the Payday Super regime.
- Streamlining payroll processes due to increased time pressure for on-time payment of SG contributions without undermining payroll governance framework.
- Contingency plan in case of a breakdown in payroll system and processes, particularly during the early days of the Payday Super regime.
- Investment of time and resources into the appropriate software and processes to ensure compliance under the regime.
- Interaction with workplace relations legislation – how should discrepancies between Award / Enterprise Agreements and SG calculation bases be handled under this environment?
With the Government committed to legislative design for the remainder of 2024, it is unlikely that draft legislation will be introduced until late 2024 or early 2025 against the backdrop of a looming election. While this may create further uncertainties, businesses should commence planning for the eventual enactment of these new measures.
