Payday Super starts 1 July 2026: what employers need to do now

Payday Super comes with a new set of calculation rules and deadlines. It is essential that employers test their payroll systems and processes to ensure they align to the new regime.

Currently, superannuation contributions must be paid to an employee’s nominated superannuation fund within 28 days of the end of a financial quarter. Contributions are calculated at a prescribed rate (currently 12 per cent) of an employee’s ordinary time earnings (OTE) base for the quarter, capped at a quarterly maximum superannuation contributions base (MSC Base). 

The contributions must be received by the relevant fund by that deadline, which practically requires contributions to be made at least one week in advance to avoid incurring SG shortfalls from late payments and consequential superannuation guarantee charge (SGC) liabilities.

From 1 July 2026, the following key changes will come into effect: 

• Superable earnings base: For all salary and wage payments made from 1 July 2026 (even if they relate to work performed before that date), SG contributions will be calculated at 12 per cent of ‘qualifying earnings’ (QE). QE includes:
  • OTE (as currently defined);
  • all commissions;
  • salary sacrifice amounts that would qualify as QE had the amount not been sacrificed; and
  • specified earnings paid to deemed employees for SG purposes. 

While this appears to expand entitlements, most QE payments would generally already be considered OTE. It is essential that employers review all pay codes and pay rules prior to 30 June to ensure no systemic errors arise.

• Application of the MSC Base: The MSC Base will apply on an annual basis, rather than being apportioned between pay periods, as pay periods will differ between employers and may change from time-to-time.
• Timing: SG contributions must be received in the employee’s super fund account within seven business days of payday.
• Calculation of SGC: SG shortfalls will now just be calculated by reference to QE payments, rather than being calculated against gross salary and wages, removing a confusing distinction in the law.
• Deductibility of SGC: SG liabilities and SG contributions for which a late payment offset is claimed are currently not tax deductible.  With the repeal of sections 26-95 and 290-95 of the Income Tax Assessment Act 1997, some or all of these payments may be tax deductible from 1 July 2026.

The seven-business day rule is strict and includes the time taken for a clearing house to process contributions and pay them to super funds. Limited exceptions apply, including a 20-business day allowance for first payments to new employees.

Once a fund receives an SG contribution, it must allocate the contribution to the employee’s account or return it within three business days, rather than the current 20-day timeframe. 

If a fund receives a contribution on the seventh business day from payday and the contribution is able to be allocated to the employee’s account within the following three days (ie within 10 days of payday), the contribution will be compliant with Payday Super requirements. 

However, if a contribution cannot be allocated to an account and is returned, it will be non-compliant and deemed late, unless it is re-sent and allocated to their account within this timeframe. 

When reviewing payroll arrangements, employers must consider:

• the timeframe required by clearing houses to disburse contributions to super funds; and
• the time required by super funds to allocate contributions. 

Returned contributions must be actioned promptly to avoid non-compliance.

We recommend SG contributions are made on the same day as QE payments, or as soon as possible after payday. 

Employers must report both QE and superannuation liability through Single Touch Payroll. 

This will provide the ATO with real-time oversight of SG contributions, increasing their monitoring and compliance capabilities. 

Where an employer does not make minimum SG contribution on time and in full, they are liable to the SGC, which is made up of the following four components:

1. SG shortfalls, calculated at 12 per cent of QE, reduced by contributions made on time;
2. A notional earnings component, calculated as the general interest charge rate multiplied by SG shortfalls, compounding daily;
3. any administrative uplift amount, calculated at 60 per cent of the SG shortfalls and the notional earnings component (this is effectively a penalty that replaces the previous 200 per cent ‘Part 7’ penalty regime); and
4. the total of any choice loadings (penalties for failing to comply with choice of fund rules). 

The consequences of non-compliance can be significant, although penalties may be reduced where employers act quickly.  

If the ATO has not initiated an assessment or made an estimate of SGC for the employer in the past 24 months, the penalty will be reduced from by 20 per cent (to a net penalty of 40 per cent). Assessments made pursuant to voluntary disclosures are not considered to be ‘initiated’ by the ATO.

Additionally, where an employer makes a voluntary disclosure to the ATO within 30 days from the late payment, the administrative uplift amount of the superannuation shortfall will be reduced by 40 per cent (net penalty depends on whether the above reduction also applies). Lesser reductions may apply on a cascading basis if the disclosure is made by a later date. 

The ATO has published Practical Compliance Guideline PCG 2026/1, setting out its compliance approach in the first year after Payday Super commences. The PCG provides examples of high, medium and low risk behaviours, and the likelihood of the ATO investigating potential breaches of the new rules. This guidance is helpful, but it is only a limited administrative concession during this transitional period for what matters will be investigated. If the ATO is required to investigate a matter (for example, in response to an employee complaint) there is very little flexibility in how the rules must be applied.

Employers should actively monitor their Payday Super compliance and proactively disclose any non-compliance to the ATO.

These changes create a number of practical considerations that employers should consider.

The existing SGC rules will continue to apply for all salary and wages paid up to 30 June 2026, and to any non-compliance with those rules. For clients that identify systemic wage and SG underpayment matters pre-dating 1 July 2026, remediation projects will face increased complexity with differing outcomes in various periods. 

Some employers currently delay SG payments to the last possible payment date for each quarter to assist with cash flow management. These employers will effectively need to pay double their usual SG contributions in the upcoming September 2026 quarter: representing SG for the June 2026 quarter (which fall due in July) and the September 2026 quarter (which must be paid immediately). This will place increased short-term cash flow pressure on businesses, which must be planned for to avoid business disruption.

The annual MSC Base will deplete for each employee over the course of the year until it is exhausted, rather than applying quarterly. This will increase cash flow pressures for businesses early in the financial year with high-income earning employees and at various times for large once-off payments of QE made to employees, such as performance bonuses or payments in lieu of notice on termination. Employers should consider these impacts when planning the timing of payments.

Consideration should be given to impact on employees who may exceed their concessional contributions cap ($30,000 in FY26 or $32,500 in FY27). This is particularly relevant to employers who regularly defer their June 2026 quarter SG contributions to July 2026. This payment, together with their Payday Super contributions throughout the year, may cause their higher-income employees to exceed their concessional contributions cap.

Some unique considerations may also arise from the changes to rules regarding deductibility of SGC and SG contributions, including where a late payment offset is claimed. This must be considered carefully.