After more than two plus years of announcements, consultation and revisions, the Payday Superannuation legislation has received the official tick of approval.
This means it is here to stay and for many employers it may feel reminiscent of the Single Touch Payroll (STP) rollout – major system changes and new implementation processes. The difference this time is that we are (hopefully) more equipped after all the experience gained from the STP 1 & 2 implementation phase.
Treasury Laws Amendment (Payday Superannuation) Bill 2025 and Superannuation Guarantee Charge Amendment Bill 2025 have confirmed a go-live date of 1 July 2026. With less than five months to prepare, now is the time to start planning.
Payday Superannuation – the basics
There are two key definitional changes at the heart of the reform:
- Qualifying Earnings (QE): This is made up of the old “ordinary times earnings” plus salary sacrifice amounts and other relevant payments.
- Qualifying Earnings Day (QE day): This is the day on which the QE is paid to an employee.
The fundamental change is this: Employers must now calculate superannuation guarantee (SG) based on the employee’s QE and make the contribution (so it can be allocated to a superannuation fund) before the end of the 7th business day after the QE day.
Thankfully, there are three sensible extensions for employer contributions:
- New employee or new fund – Employers will have 20 business days from QE day if they are paying a new employee for the first time or making SG contributions to an employee’s new superannuation fund.
- Out of cycle payments – Relevant contributions can be paid before the end of the 7th business day after the next QE day.
- Exceptional circumstances – Natural disasters, technological failures and similar events may also qualify for extensions.
Annual maximum contributions base – plot twist
The reforms also introduce an annual maximum contributions base (MCB), replacing the long-standing quarterly limits, which will trigger system and process updates for many employers.
Starting from 1 July 2026, the annual MCB is $250,000 meaning you do not need to pay SG on any qualifying earnings above this amount for an employee during the financial year.
To address situations where an employee has multiple employers during the year and likely to exceed the concessional contributions cap, the legislation introduces the “shortfall exemption certificate”. This certificate to be applied for by the employee grants the exemption of paying SG.
The good news for the employer? This prevents them from having a SG shortfall (or “not paying enough”) for the period they are covered by the certificate. This is particularly relevant in the new regime where employees may reach the MCB early in the financial year.
Small win: deductions for Superannuation Guarantee Charge (SGC) and late payments
More good news: Employers can now claim a tax deduction for any SGC and late superannuation payments. However, penalties and general interest charges applied to any unpaid SGC amounts will not be deductible.
The catch: a tougher penalty regime
The penalty regime has also had an overhaul, and it is worth spending some time familiarising yourself with the details. Employers that are found to have SG shortfalls need to be aware of the revised SGC which includes:
- The individual SG shortfall
- Notional earnings
- An administrative uplift component
- A choice loading where choice of fund rules are breached
It is anticipated that regulations (which at the time of writing are yet to become law), will allow employers to reduce the administration uplift percentage (60% of SG shortfall amount) to nil in the following situations:
- 20% reduction where no ATO initiated assessment has been made during the 24 months ending on the QE Day.
- Up to 40% reduction where an employer makes a voluntary disclosure and the ATO has not already made an independent assessment.
This voluntary disclosure process will replace the existing SGC statements.
Where any SGC amounts are processed, additional penalties and interest can apply which cannot be remitted if they remain unpaid.
Importantly, if an employer needs to undertake any remediation (i.e. fix historic errors prior to 1 July 2026), it must follow the rules of the regime that applied at the time the error occurred. This means added complexity where an employer is remediating over a period that crosses over the old and new SG regime.
ATO enforcement: more data, more visibility
On the enforcement front, the Australian Taxation Office (ATO) now has more autonomy. Instead of relying on random audit activity, it can impose a SG shortfall using data sourced from STP and superannuation fund reporting. Key points:
- Shortfalls will equate to the short or late-paid amount as opposed to the existing separate calculation.
- Interest on shortfalls will apply until the SG is actually paid as opposed to when the disclosure is lodged.
The ATO has also issued Practical Compliance Guideline (PCG 2026/1) outlining its compliance approach for the first year of Payday Superannuation implementation. The tone of the guideline suggests the ATO will adopt a sensible, educative approach, with the focus on helping employers with implementation. As a result, the main compliance resources will be directed to “high-risk” employers – being those failing to make sufficient contributions or miscalculating qualifying earnings.
Reporting changes: STP and SuperStream
A few more updates:
STP reporting will now include a:
- Code Q for Qualifying Earnings
- Code L for the superannuation liability or portion of pay subject to SG.
SuperStream will be introduced to:
- Improve error handling
- Reduce incorrect accounts and misdirected contributions.
Don’t wait, start preparing now!
Here are some practical steps to start working through now:
- Understand the ATO’s first year compliance approach (PCG 2026/1): This will provide insights into the ATO’s focus areas as we move into the new regime post 1 July 2026.
- Assess the cash flow impact: More frequent SG payments will affect cash flow. Make sure this is discussed at management and finance meetings where applicable.
- Revisit onboarding processes: For both employees and relevant contractors, ensure you are collecting the relevant information needed so contributions are accurate and recognised promptly.
- Update payroll systems: Check your payroll software can handle the new annual maximum contributions base and new STP reporting requirements.
- Review clearing house arrangements: Confirm your arrangements and cut-off times still work under the new Payday Superannuation timing rules.
- Communicate with employees: Share the good news – explain what the changes mean to them, focusing on cash flow benefits, transparency and more timely super contributions.
- Be aware of increased ATO visibility: With access to timely data, expect a more proactive ATO approach to superannuation compliance.
How William Buck can support you
We are ready to assist you with navigating the Payday Superannuation changes. Here are some ways we can help:
- Payroll code review – We can review your payroll codes to ensure they’re correctly configured for SG and other employment tax purposes (e.g. PAYG, payroll tax).
- Complete process revisit – We can undertake a complete review of your payroll processes to identify high risk areas and provide practical recommendations for improvement.
- Drafting communications – We can help draft communications to employees focusing on timing, cash flow, transparency and improved information access.
- High-risk hot spots – We can investigate known high-risk areas such as:
- Treatment of contractors
- Allowances (and whether they are expended)
- Annual leave loading treatment
- Remediation support – If non-compliance has been detected, we can assist with designing and implementing remediation in line with the correct regime and new voluntary disclosure process.
If you would like to have a chat and discuss how these changes may affect your business, please contact your local William Buck advisor or office.
Payday Superannuation is coming – and preparation is key.
