Graeme Colley, a respected educator, policy advisor, and technical expert with over 30 years’ experience in taxation and superannuation is back with a new blog post covering key questions around Payday Super and how to navigate this upcoming change.

You can also watch his latest webinar covering this upcoming legislation in more detail here.

Background to Payday Super

Payday Super commences on 1 July 2026 and shifts the Superannuation Guarantee (SG) system from quarterly to per-pay-cycle timing of SG contributions.  Employers must ensure SG contributions are made and accepted by super funds in close alignment with each pay event to avoid any SG charge liability. Typical paydays are weekly, fortnightly, or monthly.

Payday Super changes employee super from 1 July this year

The significant changes to Super Guarantee from 1 July 2026 require employers to make super contributions for their employees and other workers as soon as they have been paid their earnings.  The reason for the change is to make sure contributions are made more regularly and to tackle the problems with unpaid compulsory super.

The calculation of Super Guarantee contributions will not change and remain as 12% of a person’s usual salary and wages plus other specified payments.  However,  employers will need to ensure that contributions are received by the super fund no later than 7 working days after the employee’s pay day (Qualifying Earnings day or QE day), whether it occurs weekly, fortnightly, monthly or on some other basis.  Employers will have extra time to make late contributions up to 20 working days after the employee’s pay day for new employees or where an employee has changed super funds.  Longer times to make contributions may be approved by the ATO in extraordinary events, such as fire, flood or other catastrophes.

Calculating the Super Guarantee Charge

The calculation of the Super Guarantee Charge (SGC) will also change from 1 July 2026.  If an employer underpays the employee’s SG contribution, does not make any contribution or the contribution is made to the incorrect fund, SGC may apply.  If the employer discovers the error before the ATO makes an SGC assessment it is possible for employer to make a voluntary disclosure statement (VDS) to the ATO and make a late contribution to the fund.  If the VDS is made prior to the ATO issuing an SGC assessment it may reduce any penalties that may apply.  Where no VDS has been sent by the employer, the ATO will make an SGC assessment based on information provided by the employer via Single Touch Payroll (STP) and the superannuation fund.

The SGC consists of 4 components:

The individual final SG shortfalls for an employee is the amount of SG contributions that are still outstanding at the time the ATO makes the SGC assessment.  The shortfalls take into account the on time and late SG contributions made by the employer.

The employer’s notional earnings components is the amount of general interest charge (GIC) payable on the employee’s SG shortfall which accrues daily.  The employer’s notional earnings stops accruing at the earlier of the day the employer makes any late eligible contributions which reduce the employee’s final SG shortfalls to nil or by the time when the ATO makes an SGC assessment, whichever occurs first.

An administrative uplift amount of 60% applies to an employer’s total individual final SG shortfalls and total individual notional earnings components for a Qualifying Earnings day.  The uplift amount may be reduced including to $nil, for example, where the employer has provided a VDS to the ATO.

The employee’s choice loadings apply where an employer has not complied with the employee’s choice of fund request to which the contributions should be made.  An employer is required to meet the choice of fund requirements for employees, including new employees to avoid a choice loading component being included in the SG shortfall.  The amount of the choice loading is equal to 25% of the value of contributions for any QE day if the employer has not met the employee’s choice of fund.

If an employer has not paid any SGC assessment 28 days after it is due and payable then penalties of 25% – 50% of the outstanding amount apply, depending on the employer’s prior compliance history.

An employer who has contributed too much SG for an employee for a QE day which is not applied may carry forward any unapplied amount for up to 12 months.  The excess can be applied against an  employer’s future individual base SG shortfall for a future QE day.

Making Contributions to the selected super fund

Contributions are usually made by an employer to the employee’s fund using SuperStream. By using SuperStream an employer can provide payments and related data to the fund, including any self-managed super funds, electronically in a standard format.

The current version of SuperStream is being updated before 1 July 2026 so that the new version, version 3External Link, will help to ensure there is:

  • less likelihood of employee’s contributions being rejected by the super fund,
  • clearer error messages if a contribution is rejected by a super fund,
  • faster payment of contributions to the fund,
  • earlier notification to the employer of changes in super fund details.

In conjunction with SuperStream a near real-time payment platform, New Payments Platform (NPP), has been developed to process an employer’s contributions.  The NPP enables an employer’s super contribution to be made through payroll systems or clearing houses and received by an employee’s super fund usually on the same day as the employer makes the payment.  Payments made through some other service providers may still take longer to reach the super fund.

SuperStream also includes a new member verification request (MVR) which allows an employer’s payroll or software solution to verify whether an employee’s super fund details are valid and that the super fund can be accept a contribution before it is made. This can include contributions made to a fund for the first time, where there has been a change in employee information (such as name) or a where a contribution has been previously rejected.  If a match cannot be made the system will provide an error message which will explain the reason for rejection.

For employers who are currently using the Small Business Clearing House it should be remembered that it was closed to new members from 1 July last year and will close permanently on 30 June 2025.  This means that employers are required to use other clearing house arrangements from that time.

Self-Managed Superannuation Funds

Self-managed superannuation funds (SMSF), must comply with all Payday and SuperStream changes.  If an SMSF receives a contribution from an unrelated employer it must ensure that the NPP can link to the fund’s bank account and that the fund has an active electronic service address (ESA).  An ESA is how SuperStream messages are delivered to an SMSF which is usually via an administrator or messaging provider.  Maintaining an active ESA is essential to ensure the employer’s contributions reach the fund in time.

If the employer contributing to an SMSF is a related party relationship, that is, where the employer, SMSF or the SMSF member is a related party there is no requirement to use SuperStream.  However, the related employer may wish to make the employee’s contribution via an electronic funds transfer or other method.  For record keeping purposes, many related party employers may wish to rely on SuperStream and the NPP to keep their payroll affairs more streamlined.

The upgrades to SuperStream allow employers to send an MVR to the SMSF before a contribution is made to the fund.  This confirms the ESA for the SMSF is active before the employer attempts to make the contribution.  If the ESA is not active it could be that the fund is not registered or the ESA is not correctly maintained.  If that’s the case the employer will receive an error message and won’t be able to make a contribution for the employee.

If the employer is unable to make the employee’s contribution to the SMSF the employer may end up with an SGC assessment if it cannot be made within the time required.  It could mean that the employer may redirect contributions to the employee’s stapled super fund or their default fund. It is also possible the employer may also ask them to complete a Superannuation standard choice form so that the contribution goes to the employee’s chosen fund.

  • In addition to the requirements that must be met by the SMSF, it should be ensured that the information provided by the employee is correct so that the employer makes the contributions to the correct fund. The employee should ensure they have provided the employer with the correct ABN, BSB and fund bank account details as well as the fund’s ESA.

ATO Compliance Approach

The ATO has published PCG 2026/1 which focuses on the ATO’s compliance approach to SG shortfalls for each Qualifying Earnings day between 1 July 2026 and 30 June 2027.  It does not intended to  change or reinterpret the legislation, or affect an employer’s obligations under other legislation, awards, or industrial instruments.

The ATO’s approach to audit will depend on whether employers have made a reasonable approach to implement Payday Super.  An employer that is not paying SG for employees or continues to pay SG on a quarterly basis (as under the pre‑2026 rules) and makes no attempt to meet the Payday Super  quarterly will be considered medium or high risk and may be investigated.  The ATO has said that it will prioritise investigations where employers have individual final SG shortfalls greater than nil for one or more employees on a QE day.

The ATO intends to use three risk zones, low, medium and high risk, to guide their compliance activity.  To be included in the Low Risk zone, as an example, if an employer attempts to pay contributions on time but they reach the fund late due to rejection by the fund, the ATO will assess risk based on whether the employer corrects the issue and how quickly the correction is made.  If the employer corrects the issue by making a late payment of contributions will be considered low risk.

To be included in the Medium Risk zone an employer will not meet the Low Risk zone criteria, but all individual final SG shortfalls are nil within 28 days after the end of the quarter in which the QE was paid.

To be included in the High‑risk zone an employer will not meet the Low Risk or Medium Risk criteria or have any individual final SG shortfall greater than nil 28 days after the end of the relevant quarter.

PCG 2026/1 provides a number of examples ranging from low to high risk and how they will be treated for compliance purposes.

After 1 July 2027, the ATO’s compliance settings will apply and PCG 2026/1 will have no further effect.

What Next?

Payday Super is a significant change to the frequency of making contributions for Super Guarantee purposes.  While the calculation of SG contributions does not change employers, fund trustees of small and large fund as well as employees need to check the information in their systems is accurate and that employer contributions will reach the selected superannuation fund in time.  Failure to have up to date systems can mean delays and a possible SGC assessment with increased penalties from the ATO.

 

If you’d like to speak to one of the Cloudoffis experts, you can reach out here.

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