Payday super

What is payday super? 

The Federal Government is proposing to change how employers pay mandatory super contributions for their employees from 1 July 2026. 

Under the proposed changes, if you’re an employer, you will be required to pay Superannuation Guarantee (SG) contributions on an employee's ‘payday’.  Following each payday, employers will have seven days for contributions to arrive in the employee’s superannuation fund, to avoid late SG penalties. 

There are limited exceptions, including an additional two weeks to remit contributions for new employees, as well an extended timeframe for some irregular payments.

Covered in this article:

• Why is the Government proposing changes to SG (payday super)?
  
• How will payday super work?
• How will payday super benefit employers?
• Other considerations for employers
  
• How will payday super benefit employees?
• What can you do as an employer?

Why is the Government proposing changes to SG (payday super)?

The Federal Government’s payday super legislation aims to create a fairer superannuation system for employees and address the issue of unpaid super. 

Unpaid super amounted to $3.4 billion in the 2019/20 financial year¹, according to ATO estimates. Payday super will make it easier for employees to track the super contributions made to their super fund. 
 

How will payday super work?

Under the proposed legislation, from 1 July 2026, employers must ensure their employee’s SG contributions are received by their super fund within seven calendar days from paying the employee’s ordinary time earnings (OTE) to avoid penalties including the Super Guarantee Charge (SGC). 

Super funds have three business days to reject a contribution if it cannot be accepted.  If the super fund cannot accept the contributions, the employer will be deemed to not have made the SG contribution and may be at risk of non-compliance.

There are several proposed exceptions to the new payday super rules: 

• Employers will generally have an additional 14 calendar days to make SG contributions for new employees to accommodate the additional time it may take for onboarding. 

• If an employer makes a contribution to a stapled fund, as notified by the Commissioner of Taxation (Commissioner), which is rejected, the total period for the employer to remit contributions is extended to 42 days .

• SG payable on out-of-cycle earnings does not have to be paid until the end of the ‘usual period’ for the next ‘QE day’ (examples noted include commissions, bonuses, advances and back payments). A ‘QE day’ or qualifying earnings day is defined as the date on which an employee is paid their qualifying earnings; in other words, their pay day for regular earnings. 

• The Commission may grant extensions of time to a class of affected employers when exceptional circumstances apply (examples noted include natural disasters or widespread ICT or communications outages).

• These exceptions do not apply to late or missed regular SG contribution payments.
   

How will payday super benefit employers?

Whilst the introduction of payday super will likely require changes to payroll processes and systems, it could make it simpler to meet your super obligations: 

• Improving payroll processes: Integrating super payments with payroll can create a more efficient and automated system. 

• Reduce payroll liabilities: Regular super payments lower the risk of accumulating large quarterly payments, streamlining cash flow management. 
   

Other considerations for employers
 

• The ATO’s Small Business Superannuation Clearing House (SBSCH) will be shut down from 1 July 2026. If you use this service, you may wish to start looking at alternatives, which may include shifting to using an online clearing house like Mercer Employer Portal² or Mercer QuickSuper³ to make SG contributions. This can help future-proof your employer super contributions and ensure your systems are already set up for when payday super commences. To join Mercer Employer Portal or Mercer QuickSuper or learn more, see the hyperlink here. 

• SuperStream updates: Along with the reduced timeframes for employers to make contributions, the timeframe that super funds must process the contributions has also been reduced, increasing the need to provide accurate data and payroll submissions initially to alleviate time pressures when rectifying any discrepancies. Below are some of the enhancements that have been recommended to help support payday super: 

  • The SuperStream Data and Payment Standards will be revised to allow payments made via your chosen payments platform and improve error messaging to ensure employers and intermediaries can quickly identify and rectify any discrepancies or errors. 

  • Super funds must validate a member’s Tax File Number (TFN) with the ATO via SuperTick within two business days (reduced from three business days). If there is a discrepancy between the data provided by the employer against ATO data, the super fund must validate this with the employer within two business days (reduced from five business days).

  • If a super fund cannot allocate a contribution, it must be refunded to the employer as soon as practicable, and no later than three business days after receiving the contribution (reduced from 20 business days).

  • Note: Previously, where incorrect payment data was provided, super funds may have been able to manually match and allocate those payments to the correct employee's super account. However, with the reduced timeframes for payment allocation and expected increased volume in payments, this manual intervention will no longer be possible, resulting in contributions being returned to the employer to verify and resubmit with correct details. This highlights the importance of improved data accuracy to comply with the reduced timeframes, while avoiding additional rework through rejections and resubmissions.

• Single Touch Payroll (STP) updates: Employers will be required to report both the ordinary time earnings and the total super liability for an employee in STP, ensuring the super guarantee payment can be correctly identified.

• Avoiding penalties: Timely payments help businesses avoid the non-deductible Super Guarantee Charge (SGC). The Australian Taxation Office has more information about the SGC.

• Updates to the Super Guarantee Charge (SGC): Changes to the design of the SGC have been proposed to align with the increased frequency of payments, and to ensure employees are fully compensated for any delays. SGC will be start accruing from the day after the seven-day due date.

   

How will payday super benefit employees?
 

• Eliminates delayed super: The proposed reform aims to ensure employees receive their SG contributions at the same time as their pay, eliminating the issue of delayed or unpaid SG contributions.

• Real-time growth: Employees will see their super grow alongside their wages, reducing lost super and improving investment outcomes. 

• Enhanced compounding returns: Frequent contributions can help employees benefit from compounding investment returns, leading to a more secure retirement. 

Treasury notes, “analysis shows that under the proposed new rules, a 25-year-old median income earner currently receiving their super quarterly and wages fortnightly could be around $6,000 or 1.5 per cent better off at retirement with the move to payday super.”¹
 

What can you do as an employer?

Although this measure is still in draft and not yet law, the first step you can take is to understand the proposed changes and how these might affect your business. 

Many employers are already preparing for the proposed payday super changes by reviewing and testing payroll system configuration for superannuation and Single Touch Payroll reporting practices to ensure readiness.

• Plan for the new payment frequency: Consider the impacts on your business cashflow of super being paid at the same time as your regular pay cycle. While the requirement is not intended to come into place until 1 July 2026 and this date could potentially still change, you could consider shifting to the payday super regime ahead of time. This is up to you as an employer, but it could help you get ahead of these regulatory changes before they come into effect.

• Review processes and systems including clearing houses: Assess your current payroll systems and processes to identify if any updates would be needed to meet the new requirements. If you currently use the ATO Small Business Superannuation Clearing House, you may wish to start looking at alternatives, which may include using either Mercer Super clearing house options: Mercer Employer Portal² or Mercer QuickSuper³

  • With proposed penalties for non-compliance becoming increasingly severe, ensuring superannuation compliance is essential to minimise financial and reputational risk. Using a super guarantee diagnostic tool, Mercer offers a comprehensive superannuation guarantee compliance review, ensuring businesses understand what is required to meet their obligations and protect the financial well-being of their employees.

• Stay informed: Keep up to date on the latest super changes by continuing to visit the Mercer Super payday super webpage, where we will provide regular updates as the requirements evolve towards their final state, as well as make available practical tools and resources to help your business with the implementation of the payday super changes, once the legislation has been enacted.