On 14 March 2025, Federal Treasury released the Payday Super draft legislation^[1] (Draft Law) for consultation, which closed on 11 April 2025. This draft represents significant changes to the superannuation guarantee (SG) system, with a proposed effective date of 1 July 2026. The introduction of Payday Super will require employers to fundamentally reassess how they manage superannuation compliance.

The Draft Law proposes to implement key design principles outlined in the September 2024 fact sheet released by Federal Treasury,^[2] while also addressing several important questions that had arisen. A&M’s Australia Tax practice has discussed the fact sheet in an earlier article.^[3]

What Is Payday Super?

Under the current SG regime, employers can make super contributions on a quarterly basis. Payday Super will change that. Starting 1 July 2026, employers will be required to pay SG contributions at the same time as salary or wages are paid — or no later than seven calendar days thereafter. There are very few exceptions to this seven-day rule, one limited exception being for new employees.

This reform is designed to:

• Minimise unpaid superannuation
• Increase transparency
• Support better retirement outcomes for Australian workers

Key Changes Under the Draft Law

Comparison Table: Current Law vs. Proposed Payday Super Law

Introduction of "Qualifying Earnings" (QE)

Under the current SGC regime, SG shortfalls must be calculated by reference to employee “salary and wages,” rather than the OTE base.

The term QE replaces the earnings base used to calculate SG. It closely mirrors the current OTE but is now formally defined to also include:

• Salary-sacrificed contributions
• Payments subject to super under expanded employee definitions (e.g., to directors and contactors captured for superannuation purposes).

This change ensures greater consistency while modernising the terminology for clarity and compliance.

Faster Payment Timeframes

Employers will be required to ensure super contributions are received by an employee's fund and allocated to the employee’s account within seven days of payday. It is likely that this requirement will prove problematic in some situations.

The Draft Law provides a series of exceptions to this seven-day requirement for contributions, including:

• Employers will generally have an additional 14 calendar days to make SG contributions for new employees, to accommodate additional onboarding time.
• If an employer makes a contribution to a stapled fund, as notified by the Commissioner of Taxation (The Commissioner), and the contribution is rejected, the total period is extended to 42 days.
• SG on out-of-cycle earnings can be rolled into payments for the next non–out-of-cycle QE day (e.g., commissions, bonuses, advances, and back payments). The Commissioner will define eligible payments through legislative instruments.
• Exceptions include circumstances, such as natural disasters or widespread ICT issues, where the Commissioner may grant extensions for affected employers.

Annual Maximum Contributions Base

The maximum contributions base (MCB) will continue to act as a ceiling on the maximum amount of contributions payable by an employer for an employee. However, the previously calculated quarterly MCB will now apply annually. However, watch this space as this is likely to produce unintended negative outcomes for both employers and employees and so may yet be amended. 

Redesigned SGC Framework

The SGC regime will continue to apply to employers who fail to meet their obligations to make superannuation contributions on behalf of their employees. The ‘SG shortfall’ for a given employee will comprise multiple components as summarised below: 

No More Quarterly SGC Statements

Employers will no longer need to submit SGC statements each quarter. The ATO will now rely on data from Single Touch Payroll (STP) and super fund reporting to automatically identify shortfalls and assess liability.

Voluntary Disclosures Encouraged

Employers can submit voluntary disclosure statements to correct errors before the ATO makes an assessment. This process encourages early self-reporting and offers financial incentives.

New Penalty Structure: "Administrative Uplift"

The draft law replaces the static $20 administrative fee with a dynamic administrative uplift:

• Starts at 60 percent of the SG shortfall and interest
• Can be reduced based on:
  • Timing of voluntary disclosure (e.g., a disclosure within 30 days could result in a 40 percent reduction).
  • The employer’s compliance history (e.g., no past ATO actions in the past 24 months could yield an additional 20 percent reduction).

This structure rewards proactive compliance and good governance but is more restrictive than the previous practice covering remission of penalties.

SGC Now Tax Deductible

Both on-time and late SG contributions — as well as the SG charge — will now be tax deductible, though general interest charges and penalties remain nondeductible.

What Should Employers Do Now?

1. Review payroll systems and configurations: Meeting the seven-calendar- day turnaround will require systems to be capable of calculating and disbursing contributions within two to three days of each pay run, without requiring manual interventions. A review of the Single Touch Payroll setup and superannuation fund reporting mechanisms will be crucial.
    
2. Enhance onboarding processes: Automate and streamline employee onboarding to avoid common errors, such as incorrect fund choice information and employee details that lead to rejected contributions.
    
3. Assess remittances framework: Tighten internal controls for superannuation remittances, ensuring payments are processed on or right after the QE day.
    
4. Real-time data validation: Develop tools to detect and fix errors before processing payroll. Voluntary disclosures for errors made within the seven-day window will significantly reduce penalties.
    
5. Prepare for SGC assessment changes: The ATO will now conduct unilateral SGC assessments based on payroll data, requiring greater accuracy in reporting and documentation.
    
6. Technology and operational readiness: Payday Super will increase reliance on real-time data, requiring employers to elevate their payroll systems, internal controls and reconciliation processes. Employers should:
    
   • Audit payroll systems for accuracy in SG calculation.
   • Strengthen STP reporting to align with ATO expectations.
   • Review clearinghouse contracts to ensure timely fund transfers.
   • Prepare for automatic assessments by implementing robust SG validation tools.
   • The ATO’s enhanced ability to assess compliance based on real-time data places a premium on data quality and prompt error resolution.

While these changes won't be implemented until mid-2026, now is the time to start reviewing and adapting our processes. As we learned with the introduction of STP, this is not just something for payroll to solve. The more proactive you can be, the greater the reduction of potential risks and penalties.

If you have any further questions on Payday Super and would like to discuss how this might impact you and your appropriate next steps, please reach out to a member of the A&M Employment Taxes team.

[1]“Payday super – exposure draft,” Australian Government, Treasury, Consultation process completed 11 April 2025, Payday super – exposure draft | Treasury.gov.au

[2] “Payday Super,” Australian Government, Treasury, Fact sheet, Payday Super factsheet

[3]Daniel Dass et al., “Payday Super – Everything you need to know,” Alvarez & Marsal, January 7, 2025, Payday Super – Everything you need to know | Alvarez & Marsal | Management Consulting | Professional Services