How Payday Super works for small businesses

The Australian Tax Office and the Treasurer, Jim Chalmers, have released more details on the  Payday Super scheme, which will take effect on July 1, 2026. The scheme was announced in the 2023-2024 Federal Budget and outlines that employers must pay their employees’ superannuation guarantee contributions alongside their regular salary and wages. 

This is quite an adjustment, as Aussie businesses have had to follow regular guidelines of contributing their employees’ super guarantees every quarter.

Why have these changes been made, and what do small businesses need to know?

Missing Super

Payday Super means that superannuation contributions must be paid at the same time as salary and wages, not at the end of each quarter. The Treasurer’s office says the changes for superannuation guarantee payments will put more money into the pocket of Aussie workers.

However, there is a more targeted reason as to why these changes are set to take place. The ATO found that in the 2021 financial year, over $3.1 billion worth of super went underpaid.

Over the last decade, over $41 billion worth of super has gone unpaid through missing payments or underpayments.

The Treasury highlights that most Aussie businesses do the right thing. However, to close the gap of missing contributions, the government has decided that Payday Super and its enforcement are needed.

What Is Payday Super?

Payday Super is when an employer pays the employee’s superannuation guarantee alongside the payment of salary and wages. 

Currently, employers are mandated to make these superannuation guarantee payments at the end of the financial quarter. 

Under the new law, employers must make this payment within seven days of paying their employees’ wage/salary. If payment isn’t made within this timeframe, employers could be subject to the superannuation guarantee charge.

Superannuation guarantee charge

The superannuation guarantee charge (SGC) is a penalty employers receive when they are found to either:

• Underpay an employee their super
• Do not pay their employee their super 
• Do not pay into the employee’s designated super fund
• Fails to pay super on time

If employers don’t pay an employee’s super correctly, the super guarantee charge is calculated as a sum of the following:

1. The shortfall calculated on salary and wages, and if applicable, choice liability capped at $500
2. Nominal interest of 10% p.a. starting from the most relevant quarter
3. An administration charge of $20 per employee

With the Payday Super changes, the ATO has been given the authority to exact harsher penalties from the current superannuation guarantee charges.

This includes:

• Increase the interest charged on an employee’s superannuation guarantee.
• Administrative fee to include a portion of the superannuation guarantee shortfall of up to 60%.
• Daily compounding interest on the superannuation guarantee shortfall and interest added to administrative fees after no action has been made upon assessment.
• If the assessment has not been rectified, an added fee of up to 50% of the outstanding superannuation guarantee charge will be charged. 

Payday super compliance

The changes with this new law coming into effect on 1 July 2026 are certainly an adjustment. Small businesses will need to be extra vigilant about their current payroll processes, as the window to make superannuation payments has shortened to just seven days of regular salary and wage payroll.

Small businesses also need to be aware that the ATO will be retiring their Small Business Superannuation Clearing House on the same date that Payday Super comes into effect. This is due to the improvements in payroll software in the last decade. 

Ultimately, the government and the ATO have come together to normalise superannuation payments alongside salary and wages, leading to a more efficient payroll system. The Treasury has provided a Payday Super factsheet for small businesses to familiarise themselves with the changes ahead. The government will release more information as the date gets closer.

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