On 18 September 2024, the government updated its Payday Super policy. Starting 1 July 2026, employers must make Super Guarantee (SG) contributions when employees are paid.

Under the current system employers have until 28 days after the end of each quarter to make SG contributions or potentially face significant non-deductible fines and penalties.

The Payday Super policy is intended to reduce unpaid and underpaid SG contributions and the proposed changes to employer Single Touch Payroll and super fund reporting to the ATO will increase awareness of SG non-compliance.

Key points:

1. Employers will pay SG on Ordinary Time Earnings (OTE) not the often-higher amount of salary and wages.
2. Employer SG contributions must be paid to a superannuation fund within 7 days. 
3. Employers will have two weeks to pay SG for any OTE payments after a new employee starts. 
4. Small irregular OTE payments outside a normal pay cycle will be included in the next cycle.
5. Employers face penalties for late SG payments. The SG Charge accrues from eight days after salary and wages have been paid at the GIC rate, compounded daily until the contributions are received.
6. The nominal SG Charge administration component will be replaced with an “administration uplift” of up to 60% of the unpaid SG. This will be reduced for voluntary non-compliance disclosures. GIC interest will accrue if an SG non-compliance assessment is issued.
7. The ATO will continue to have the ability to charge additional SG penalties – these will apply if the ATO have issued a SG non-compliance assessment and the employer has not paid the outstanding amount within 28 days.  The penalty will be a maximum of 50% of the unpaid SG charge amount.
8. Late SG contributions will be tax deductible.
9. Interest and penalties on SG charges will not be tax deductible.
10. SG contributions will count towards the earliest unpaid payday with an SG shortfall that hasn’t been assessed for the SG charge.
11. Employers will report OTE and their total super liability via Single Touch Payroll.
12. Super funds will have three business days to allocate and return contributions.
13. The ATO will replace the current Excel spreadsheet reporting process for voluntarily disclosing SG non- compliance with a more efficient system. 

Super contribution transaction network

The superannuation system handles about 200 million employer contribution transactions per year, with a 1.6% error rate. Payday Superannuation is expected to generate over 500 million contribution transactions yearly.  The same error rate could see about 8 million errors. Some organisations will not be able to manually handle this volume of errors so reducing them will become essential.

The government will update SuperStream data and payment standards to use the New Payments Platform for employer contributions, improving error messaging. The Gateway Network Governance Body (GNGB) (the industry owned not-for profit organisation that manages the integrity of the Superannuation Transaction Network) notes significant technology and process changes in the past 10 years, necessitating an update.

ATO Small Business Super Clearing House to be shut down

The ATO will shut down the Small Business Super Clearing House by 1 July 2026, citing improvements in payroll software as “cost-effective and fit-for-purpose” for payday super contributions.

Employers using the Clearing House must find alternative solutions.

Who pays for increased costs?

Employers will face higher costs and complexity, potentially leading to reduced pay frequency, headcount, pay rises and delayed recruitment. The ATO, digital service providers, clearing houses, gateway operators and fund administrators will also incur increased costs. Who will bear these costs?

This policy is yet to be put into legislation or regulation so further adjustments can be expected as it’s finalised.

What employer contributions does this measure not apply to?

The Payday super policy does not apply to Salary Sacrifice contributions or after-tax employee contributions.  Many industrial awards require the latter contributions to be paid to a superannuation fund monthly but are silent about salary sacrifice contributions.

We continue to closely watch the development of this policy

CA ANZ has been, and will continue to be, very actively involved in the development of the Payday Super policy.  Our aim is to ensure the best system for everyone is created.  We will keep our members informed.