News & Insights

As part of the 2023-2024 budget, the Australian Government announced that it would introduce a new measure as part of the Securing Australians’ Superannuation Package. While consultation on the proposed measures has now closed (and no draft legislation has yet been issued), it continues to be high on the radar of business owners and advisers, given the news of the increased payment frequency of superannuation contributions on behalf of employees.

What is Payday Super?

From 1 July 2026, employers will be required to make superannuation contributions to employees at the same time that salary and wages are paid – on payday. ‘Payday’ is the date that employers make payments to employees for ordinary time earnings (OTE) so each time OTE is paid, there will be a new 7 (calendar) day due date for contributions to enter employee superannuation funds.  Until these measures are legislated, employers will continue to be required to pay quarterly.

Purpose of Payday Super

The purpose of this measure is to strengthen Australia’s superannuation system by reducing the risk of underpayments and wage theft, enabling employees to hold more superannuation contributions at retirement and facilitating the Australian Taxation Office (ATO) to promptly rectify instances of underpaid or non-paid superannuation contributions. For context, the ATO has estimated that $3.6 billion worth of superannuation contributions remained unpaid in 2020 and 2021 alone.

Practical implications of the reform

The non-payment and underpayment of superannuation contributions can amount to wage theft. Should the new legislation pass, it is expected that employees will be in a better position to track their superannuation entitlements and any underpayments due to the increased frequency of contributions as part of the changes. Where employers underpay or fail to make superannuation contributions to employees, such employees will be able to make complaints regarding employer non-compliance directly or through the Fair Work Ombudsman or ATO.

Employer payroll systems are also expected to benefit from Payday Super reforms, as superannuation contributions will likely become easier to manage and monitor, thereby reducing the risk of significant liabilities being incurred by employers.

Superannuation Guarantee charge

Where employers fail to make superannuation contributions within the 7-day due date, employers will be liable for the new Superannuation Guarantee (SG) charge which it is proposed will be amended proportionately to reflect the changes in payment frequency

Exceptions to liability will include:

• Where the due date is deferred until after the first two weeks of a new employee’s employment for contributions relating to Ordinary Time Earnings (OTE) paid within the first two weeks of employment; and
• where the payday is considered the next regular OTE payment after small and irregular payments occur outside an employee’s ordinary pay cycle.

Given the existing draconian SG regime, and the potential penalties able to be levied up to 200% of the contribution shortfall, it is easy to see how costs will quickly stack up for business.

What’s next for Payday Super

Treasury has indicated that the new legislation and associated consultation will be progressed through the second half of 2024, so we can expect to receive more information and guidance soon on how these reforms will be implemented, and how employers can prepare for the changes. In the meantime, please don’t hesitate to contact our Employment, Safety and Migration and Tax teams at Macpherson Kelley for more information.

The information contained in this article is general in nature and cannot be relied on as legal advice nor does it create an engagement. Please contact one of our lawyers listed above for advice about your specific situation.