In the 2023-24 Federal Budget, the Government announced some significant changes to Superannuation Guarantee (SG) payments. While we’re still waiting on final legislative and administrative details, here’s a sneak peek at what we know so far…
What’s Changing?
From 1 July 2026, SG contributions will need to be paid at the same time you pay your employees’ wages—whether that’s weekly, fortnightly, or monthly—rather than quarterly. This change aims to ensure super contributions reach employees faster and more frequently, which could simplify payroll management for businesses that currently only process super quarterly. No more large liabilities building up!
This update also coincides with the Government’s plan to increase the SG rate from 11.5% to 12% starting 1 July 2025. So, there are a couple of important things to keep in mind as we look ahead.
What Does This Mean for You?
As of 1 July 2026, every time you pay your employees’ Ordinary Time Earnings (OTE), you’ll need to make their SG contributions, with a 7-day deadline for the funds to land in their super accounts. Missing this deadline could result in penalties through an updated SG charge, which may be costly, especially for repeat offenders. The ATO is stepping up enforcement, so it’s crucial to stay on top of your super obligations.
Why the change?
The goal of the Payday Super legislation is to make Australia’s retirement savings system more efficient and transparent. By requiring superannuation contributions to be made in line with each pay cycle rather than quarterly, employees benefit from faster access to their super funds, which can boost their long-term returns through compounding interest.
This change also gives employees more visibility over their super payments, making it easier for them to ensure their contributions are being made on time. For employers, it reduces the risk of falling behind on payments, which has been a common issue with less frequent contributions.
In short, this reform improves compliance and creates better outcomes for employees’ retirement savings.
The benefits of paying super more frequently
Greater potential investment returns: When super contributions are made quarterly, there is a delay in the funds being invested. This can impact the potential growth of the superannuation balance due to the loss of compounding interest over time. More frequent contributions allow for earlier investment and potentially greater returns.
Cash Flow Management: For employers, accumulating the required superannuation contributions over a three-month period can create cash flow challenges. Businesses may struggle to set aside sufficient funds, especially if they experience fluctuations in revenue or unexpected expenses.
Compliance Risks: Quarterly payments increase the risk of non-compliance with superannuation obligations. If an employer fails to make the payment by the due date, they may incur penalties and interest charges under the Superannuation Guarantee Charge (SGC), which are not tax-deductible.
Employee Uncertainty: Employees may find it difficult to track their superannuation contributions when they are made quarterly. This can lead to uncertainty about whether their employer is meeting their obligations, potentially affecting employee trust and satisfaction.
Administrative Burden: Managing superannuation payments on a quarterly basis can be administratively burdensome for employers, particularly small businesses without dedicated financial staff. The process of calculating, reporting, and paying super contributions can be complex and time-consuming.
Potential for Errors: With less frequent payments, there is a greater chance of errors in calculations or reporting going unnoticed until the end of the quarter. This can lead to discrepancies that require correction, adding to the administrative workload.
Regulatory Scrutiny: The ATO are likely to scrutinise businesses that consistently pay superannuation late or inaccurately. This can lead to audits or investigations, further increasing the administrative burden and potential financial penalties.
To mitigate these issues, some businesses are already opting to make superannuation contributions more frequently, such as aligning them with payroll cycles.
Other Changes to Support Payday Super
To help ease the transition, the following updates will also come into effect:
- The ATO’s Small Business Super Clearing House (SBSCH) will be retired from 1 July 2026, as payroll software has advanced significantly. The ATO will support small businesses in moving to a Payday Super-ready system.
- SuperStream data and payment standards will be updated to make it easier to fix payment errors, and super payments will be processed through the New Payments Platform (NPP) for faster transactions.
- Super funds will now have three business days (down from twenty) to allocate or return contributions, speeding things up overall.
More Information
For the finer details, you can check the ATO website or download the latest Fact Sheet from Treasury. And as always, if you have any questions or need assistance navigating these changes, don’t hesitate to reach out.
We’ll keep you updated as we learn more, but we’re always here to help when you need it.
