Australia’s Payday Superannuation reform, set to take effect on 1 July 2026, will require employers to pay superannuation contributions on payday instead of quarterly.
Draft Legislation
The Australian Government has released draft legislation to implement the Payday Superannuation reform. Superannuation (or super) is money put aside by an employer over the working life of an employee for the employee to live on after retiring from work. The employee can only withdraw super money in certain situations, such as upon retirement or attaining age 65.
This reform mandates that employers make superannuation contributions concurrently with salary and wages rather than adhering to the current quarterly schedule. This initiative, set to commence on 1 July 2026, was already included in the Securing Australians’ Superannuation Package announced in the 2023-2024 Budget.
The reform aims to strengthen Australia’s superannuation system, tackling the issue of unpaid and underpaid super, which can significantly impact workers’ retirement savings. According to the Payday Super Fact Sheet:
- Around 8.9 million employees are expected to benefit from more frequent superannuation contributions.
- Frequent super payments will allow employees to track their entitlements more easily and hold noncompliant employers accountable.
- Employers will have a seven-day deadline for super payments after each payday, with penalties for noncompliance.
- The Australian Taxation Office (ATO) will be empowered to monitor data in real-time through Single Touch Payroll (STP) to detect missing or late super payments.
Key Implications
This reform is part of the broader government strategy to enhance Australia’s superannuation system, which also includes increasing the superannuation rate to 12% by 1 July 2025 and reforming super tax concessions and performance tests. If the draft bill is approved, aside from the pay frequency, the employee’s superannuation fund must receive payments within seven calendar days of the employee’s payday. Failure to do so will result in superannuation charge penalties. Additionally, the superannuation charge will be tax-deductible, whereas penalties and interest following the ATO assessment will not be tax-deductible.
Transition Support for Employers
To facilitate the transition to the Payday Super reform, the government has proposed several support measures, including requiring superannuation funds to allocate contributions within three business days instead of the current 20-day timeframe, revising SuperStream data standards to enhance error messaging, retiring the ATO’s Small Business Superannuation Clearing House from 1 July 2026 to encourage businesses to adopt modern payroll solutions, and mandating that employers provide employees with details of their “stapled” super fund during onboarding to minimise duplicate accounts.
What’s Next?
The Treasury is seeking public feedback on the draft legislation until 11 April 2025. Employers, payroll professionals, and other stakeholders are encouraged to participate in discussions to refine the implementation details. With Payday Super set to transform payroll compliance, businesses and providers need to start preparing now to ensure seamless integration into their payroll systems and payroll compliance cash flow by the anticipated implementation date.
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Max van der Klis-Busink, MCIPP, RPP, is the Owner of Passion For Payroll and Vice President of Global Strategy on PayrollOrg’s Board of Directors.
