Cast your mind back to May 2023. Specifically, to the 2023-24 budget announcement that Employee super contributions will shift from quarterly to a pay cycle payment. Many small Businesses currently work on the quarterly system. But that is about to change to across-the-board payday payments. This change is referred to as the Payday Super Legislation.
The ATO confirms that as of 1 July 2026, this new legislation will come into effect and new processes will be in play. What we want to focus on here is what this means in real life for small businesses, how it will change the way you currently work on your super cycle and what you need to do now to prepare. So, let’s get down to the nuts and bolts of this new legislation.
What is Payday Super?
Simply put, with Payday Super, employers will be required to pay their employees’ superannuation contributions at the same time as wages are received, rather than quarterly. Legislation introduced in 2025 specifies that from 1 July 2026, superannuation must be received by the employee’s super fund within 7 business days of their wages being paid. This legislation was introduced to increase efficiency, reduce unpaid super, improve visibility and compliance, and improve retirement balances.
What is Changing?
The biggest change this legislation will bring is that super contributions will be made on pay cycles rather than quarterly. However, there are some other flow-on changes as a result of this legislation.
Calculations
In the past, Ordinary Time Earnings (OTE) was the basis for calculating superannuation in Australia. Super Guarantee Charges (SGC) are still calculated at 12% but will be based on Qualified Earnings (QE). For most employers, QE won’t materially change SG amounts. QE expands and clarifies which items are subject to SGC and specifies additional payroll-related payments.
• Ordinary time earnings (OTE), i.e. payments for ordinary hours of work, including certain types of paid leave, allowances, bonuses and lump sum payments.
• All commissions paid to an employee.
• Salary sacrifice amounts that would qualify as QE had they not been sacrificed to Superannuation.
• Earnings paid to workers who fall under the expanded definition of employee, including payments to independent contractors paid mainly for their labour.
Single Touch Payroll (STP)
To allow the ATO to more quickly identify late or missing super payments, there will be a heightened focus on Single Touch Payroll (STP) reporting. From 1 July 2026, reporting both year‑to‑date QE and year‑to‑date super liability will be mandatory in STP. Submissions failing to include both may be rejected.
Small Business Superannuation Clearing House (SBSCH)
As a result of this change, the ATO’s Small Business Superannuation Clearing House (SBSCH) service will permanently close at 11:59pm AEST on 30 June 2026. From 1 July 2026, employers will need to transition to SuperStream-compliant payroll software or commercial clearing houses, many of which include automated error-checking and faster processing.
Super Guarantee Charges
Under this legislation, there will also be strong consequences for late super payments. If contributions are not received by the employee’s super fund within 7 business days of payday, a Super Guarantee Charge will be applied.
The SGC is assessed for each payday and includes:
- The final SG Shortfall (based on QE),
- Notional Earnings (reflects the earnings that an employee’s super balance would have accrued if the super had been received on time),
- An Administrative Uplift (Default is 60% of the SG shortfall)
- Choice-of-fund Loadings – is applied if the employer does not offer employees a standard choice form, has not checked for a stapled fund or pays to the wrong fund.
A good history of their superannuation payments, along with a voluntary disclosure, can reduce the administrative uplift.
For paydays on or after 1 July 2026, late super contributions and the Super Guarantee Charge (including notional earnings and the administrative uplift) are tax-deductible. However, penalties and interest imposed after an SGC assessment remain non‑deductible.
Employee Data and Payment Processes
Member verification requests will help to match employee contributions to the right super fund. Also, a fund validation service will alert employers to any changes to super fund details.
How Payday Super Will Impact Small Business?
There are several points of impact for small businesses when considering the Payday Super changes.
Cash Flow Pressure
There will be a greater need to monitor cashflow, as employers will be obligated to have sufficient funds available each pay cycle to address super payments. This cashflow pressure will be significantly increased during July because the new PaydaySuper regime begins at the same time as the June Quarter SG payment is due on 28th July, 2026. Many employers will need to pay both the June Quarter SG and their July Payday Super contributions within a very short period. The transition to pay-day super, coupled with Q4 super and the Q4 BAS deadline, may cause critical cash flow pressures for many small to medium businesses. Very careful monitoring of cashflow will be required along with an increased need for tighter budgeting and cashflow management.
Mental Shift
The shift to Payday Super will require a change in thinking. Employers need to view superannuation not as an occasional quarterly payment, but as an integral part of every pay run—essentially, super payments are part of employees’ wages.
Increased Payroll/Super Processing
Every payroll run will now include super calculations, super reporting, and super payments to employee funds. That means more frequent super transactions in a year (potentially 52 instead of 4), more data sent to the ATO each pay period and more frequent fund payments. The result being an increase in the administrative workload.
Clean Employee Information
In the past, employers were able to fix employee errors, such as personal details, fund information, member number and up-to-date settings over a quarterly payment period. With this new system, super is processed each payday immediately, and mistakes may occur more often. There will be less time to correct errors, more reliance on correct payroll set up and a greater need for system integration between payroll and super. It also means less room for administrative delays and manual errors.
Integration and Reconciliation
An up-to-date, STP and Payday Super compliant payroll, accounting and superannuation system will be essential. These systems will need to calculate, report and pay super each pay cycle with real-time processing to reduce errors and ensure compliance. This should be prepared for well ahead of time to test system and identify potential failures.
Additionally, businesses will need to action reconciliations more regularly, preferably each pay run, or at a minimum, monthly. This is needed to support correct super amounts calculated, reported and paid for, for each employee entitlement, as well as for ATO records. Covering yourself for such things as rejected payments, incorrect fund details, and timing delays. Thus, identifying issues early and reducing penalties.
The ATO recommends preparing and testing systems well before 1 July 2026 to identify potential configuration issues early and reduce the risk of penalties.
How to Prepare before 1 July 2026
February-April 2026
Check employee super fund details
Checking that employee fund details are up to date and accurate will assist in a smoother transition. Additionally, any salary sacrifice settings will need to be checked and adjusted so calculations are correct for each pay run. If not then there may be delays in payments, which will incur penalties. Also, review and check any current error messages from super funds.
Plan to get ahead with super
Plan for more frequent super payments from April to June. Making more regular super payments during Q4 will reduce the pressure of having to pay a full quarter’s super in July. Payday Super will reduce available cash on hand during July because of the increase in payments. Budgeting will sit at the forefront of this planning so that funds are available to meet ongoing super constraints.
Seek Help
If these changes seem too overwhelming or if you don’t feel equipped, then it’s important to speak with a professional bookkeeper or your accountant early. If you don’t already use an STP or a Payday Super-compliant payroll software, get advice and act now. It will take some time to consider, test, and migrate to a compliant payroll system. The ATO system changes will be almost immediate as of 1 July 2026 and they will have a more heightened focus on STP reporting. You don’t want to be caught out with unnecessary penalties and errors.
April-June 2026
Payroll software will need to be reviewed to ensure it can calculate, report and pay superannuation each pay run. It must also be STP-compliant. Also needed is a check on whether it integrates with a clearing house or super fund for timely payments.
Workflows will also need to be reviewed for super payments to ensure they fall in line with automated processes.
Test and prepare
A test of the end-to-end process is advised to identify gaps. Staff training may be needed on these new procedures and timing needs. All these practices will be important for a smooth transition.
Understand QE vs OTE
Make sure you understand the new payroll governance processes clearly. Read up on QE and how it applies to SG calculations.
Shift and automate
A shift away from outdated manual clearing-house processes is advised. Speed is of the essence with this new system. Accuracy is also at the forefront and increased frequency means more frequent payments per pay cycle. Old systems are too slow and increase the risk of errors, so embrace automation.
Update
You may have to seek out a new SuperStream-compliant software product that meets the requirements if your current system doesn’t update for these new changes. Transition from SBSCH to the new Payday Super software system well in advance of the shutdown deadline. Download the super history and staff information from your old non-compliant super system. SBSCH will be permanently deactivated at midnight on 30th June. You won’t be able to access any of the information held there from 1 July 2026, so you need to get set up and ready to go well before then.
Common Mistakes to Avoid
While there is no formal grace period written into the law, the ATO has confirmed a risk‑based compliance approach for the first year of operation, particularly where employers are making genuine efforts to comply. However, missing the 7-day payment deadline may trigger a Superannuation Guarantee Charge (SGC). All buffers will be removed.
Avoid the Dont’s and action the Do’s to evade negative consequences:
• Don’t make the assumption that your clearing house or super payments workflow will remain valid after 1 July 2026.
◦ Do make sure you have reviewed, checked and planned for these changes.
• Don’t wait till the last minute to make these changes to your systems.
◦ Do prepare, test and migrate to an STP and Payday Super complaint system early
• Don’t assume current payroll tools are ready
◦ Do ask questions about your current payroll system and whether it will be compliant
• Don’t forget to update fund/member details
◦ Do review your staff’s super details and double check they are correct
• Don’t treat super as a quarterly cash flow item
◦ Do start paying super more regularly to prevent a cash flow crisis
• Don’t ignore rejected or delayed payments
◦ Do get your super up to date and address any outstanding issues
How Numble Can Help
Numble bookkeeping services is fully qualified and ready to assist you if you’re feeling ill-equipped or overwhelmed. We offer the following services to assist in this transition:
• Advice on suitable STP and Payday Super compliant payroll software
• Payroll services from setup and review to ongoing support
• Super processing, review and support
• Ongoing bookkeeping/payroll support
• Compliance support before any deadlines
If you need small business compliance support reach out to our Numble team today.
