ATO Compliance Update: What Payday Super Means for Employers
The Payday Super reform, introduced as part of the 2023/24 Federal Budget under Australia’s Securing Australians’ Superannuation Package, represents a major shift in how Superannuation Guarantee (SG) contributions are managed.
Starting from 1 July 2026, employers will be required to make SG contributions on every payday rather than on a quarterly basis.
This change holds significant implications for employers, employees, and the Australian Tax Office (ATO), impacting payroll processes, superannuation compliance, and tax obligations.
Our taxation team has examined the upcoming reforms to outline their key elements and implications.
Key Changes Under the Payday Super Reform
1. SG Contributions Now Aligned with Paydays
From July 2026, SG contributions must be made every payday.
This adjustment is intended to reduce the delay between when employees work and when their super contributions are paid, allowing employees to see contributions in near real-time and potentially flag unpaid super issues more quickly.
2. New Contribution Deadlines
Employers will have a seven-day window to transfer super contributions to their employees’ superannuation funds following each payday.
Certain exceptions will apply, such as irregular payments and contributions made in the first two weeks of employment for new hires.
3. Updated SG Charge Penalties for Non-Compliance
Employers who miss the SG contribution deadline will be subject to an SG charge, which has been updated to reflect the new payday requirements.
This charge includes:
- The SG shortfall, calculated based on Ordinary Time Earnings (OTE).
- Daily interest on the shortfall, compounding from the missed due date.
- An administrative uplift, which can reach up to 60% to take into account enforcement costs.
Employers who promptly rectify missed contributions may see reduced administrative penalties, though repeated non-compliance can lead to heightened penalties.
It’s also important to note that these penalties are non-deductible.
Let’s say an employer has an SG contribution shortfall of $1,000 for an employee, based on their Ordinary Time Earnings, and the contribution due date is missed.
- SG Shortfall: The $1,000 unpaid SG contribution.
- Daily Interest on the Shortfall: Interest is calculated daily from the missed due date until payment is made. For example, if the interest rate is set at 10% per annum, the daily compounding interest could quickly add up. If the payment is delayed by just one month, this could add approximately $8 to $10 in interest, depending on the compounding rate and actual number of days missed.
- Administrative Uplift: The ATO may apply an additional administrative penalty, up to 60% of the SG shortfall, to cover enforcement costs. A $1,000 shortfall could mean an additional $600 in penalties.
In this example, the SG charge would total approximately $1,608, combining the $1,000 shortfall, accrued interest, and a $600 administrative uplift.
4. Enhanced Monitoring & Compliance by the ATO
With the increased integration of data from Single Touch Payroll (STP) and superannuation fund reporting, the ATO will now be able to detect SG compliance issues more quickly.
Employers will need to report both OTE and super liabilities with each pay cycle, giving the ATO a greater level of scrutiny of SG contributions and allowing earlier intervention for unpaid super.
5. Streamlined Late Contribution Corrections
To simplify the correction of missed SG payments, late contributions will now automatically apply to the earliest pay period with an SG shortfall.
Implications for Employers
Payroll practices will need to be closely aligned with the new requirements to avoid penalties, especially in industries where payroll may be managed less frequently.
Employers who may already be managing SG compliance disputes, ATO penalties for unpaid super, or tax disputes related to superannuation should carefully review their systems to ensure a smooth transition.
Benefits for Employees
Employees will be able to track super contributions more accurately, holding employers accountable for timely payments and spotting discrepancies faster.
The ATO’s increased oversight capabilities should also ensure swifter intervention when non-compliance is identified.
Employers are encouraged to prepare for these changes well before the 1 July 2026 commencement date, ensuring that payroll systems are equipped to handle the more frequent SG contribution requirements and to prevent SG charge penalties.
Frequently Asked Questions on the Payday Super Reform
What does the Payday Super reform mean for SG contributions?
From 1 July 2026, employers must align Superannuation Guarantee (SG) contributions with employees’ pay cycles.
This means that each time wages are paid, the SG contribution must be processed and sent to the employee’s super fund within seven days.
This is a shift from the current quarterly system.
Are there any exceptions to the payday rule?
There are limited exceptions.
For example, SG contributions made in the first two weeks of a new employee’s start date may have slightly different requirements.
Certain irregular payments may also fall outside of the standard payday SG contribution requirements.
What happens if I miss a payday SG contribution?
Missing an SG contribution will result in an SG charge from the ATO, which is calculated on Ordinary Time Earnings (OTE) and includes daily interest and an administrative uplift.
Penalties are typically non-deductible and can become costly.
How will this affect contractors versus employees?
If a contractor is deemed an employee under superannuation laws, the employer may be required to make SG contributions on their behalf, following the new payday rules.
Determining the correct classification between contractor and employee can be complex, and misclassification may lead to SG disputes and penalties.
What happens to the quarterly SG contribution system until 1 July 2026?
Until the reform takes effect, the quarterly SG contribution deadlines remain in place.
How can employers correct a missed SG payment?
Under the reform, missed SG contributions will automatically apply to the earliest pay period with an SG shortfall.
However, penalties may still apply, depending on the circumstances and timing of the correction.
How will the ATO monitor SG contributions under the new system?
With enhanced data from Single Touch Payroll (STP) and superannuation fund reporting, the ATO will have near real-time visibility into SG contributions.
Employers must report both Ordinary Time Earnings (OTE) and superannuation liabilities with each pay cycle.
What options do employees have if they notice discrepancies in their SG contributions?
Employees will have greater visibility into their super contributions under the new system.
If a discrepancy is identified, the employee should first address it with their employer, and if unresolved, contact the ATO for assistance.
In cases where employers face compliance disputes or potential ATO intervention, legal assistance may be needed to resolve the issue effectively.
Contact Us
Businesses facing SG charge disputes, ATO penalties, or complex SG compliance issues may benefit from professional assistance.
Early intervention can often lead to more favourable outcomes and help prevent future non-compliance.
For more information, contact Bambrick Legal today. We offer a free, no-obligation 15-min consultation for all enquiries.
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