What Are Payday Super Reforms?
The Government’s payday super reforms aim to ensure employees receive super contributions on payday rather than later. This change allows contributions to grow earlier and compound over time, while reducing unpaid super, which has historically impacted low-paid, casual, and insecure workers.
The ATO estimates $5.2 billion in super went unpaid in the most recent financial year. For example, a 35-year-old in a typical unpaid super case could gain over $30,000 at retirement by recovering unpaid super.
Key Changes in the Legislation
The legislation recently introduced to Parliament includes updates from earlier drafts:
- Contribution timeframes are measured in business days instead of calendar days.
- New employees: Employers have 20 business days to make super contributions (previously 21 calendar days).
- Existing employees moving funds: The 20-business-day rule also applies.
While the legislation still needs to pass both houses of Parliament, employers should start preparing now.
ATO First Year Compliance Approach
The ATO draft guideline PCG 2025/D5 outlines a risk-based compliance framework for the first year of payday super (1 July 2026 – 30 June 2027). Employers will be categorised into three risk zones:
Low Risk
- Employers making genuine efforts to comply.
- Timely contributions and prompt error correction.
- Minimal chance of ATO review.
Medium Risk
- Employers transitioning to new rules with some late contributions.
- Contributions correct, but payment frequency not aligned with payroll.
- ATO may investigate, but after high-risk employers.
High Risk
- Employers failing to pay minimum contributions.
- Highest priority for ATO investigation and enforcement.
Comments on the draft guideline can be submitted to the ATO until 7 November 2025.
How Employers Can Prepare
Preparation is essential to ensure a smooth transition to payday super:
- Review payroll systems and processes to handle more frequent contributions.
- Consider cash flow implications due to increased payment frequency.
- Explore alternatives if using SBSCH, as it closes 1 July 2026.
- Monitor legislation and ATO guidance for last-minute changes.
Key Takeaways
- Payday super ensures employees are paid super on payday, reducing unpaid super.
- Contribution deadlines are now measured in business days.
- The ATO’s draft guideline provides a first-year compliance framework.
- Early preparation helps employers manage payroll, cash flow, and compliance risks.