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.
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.
An employer incurs an SG charge if they have an SG shortfall for a Qualifying Earnings (QE) day which is the day an ‘employee’, including some contractors, receives salary and wages as well as other specified payments for the work they do. The QE day is the day the payment is to be subject to an SG contribution to a superannuation fund.
Qualifying Earnings is the earnings used to calculate an employee’s SG contributions and includes:
The maximum contributions cap on SG contributions will be calculated annually from 1 July 2026, which simplifies compliance for high-income earners.
An SG shortfall occurs where an employer has:
The SG charge applies where an employer has underpaid the correct amount of Superannuation Guarantee contributions for an employee and consists of:
If SG charges remain unpaid 28 days after assessment, penalties of 25%–50% of the outstanding amount will apply, depending on prior compliance history.
If an employer has an individual-based SG shortfall, it is still possible to reduce (but not eliminate) the SG charge by making late contributions prior to the ATO issuing an assessment. While late contributions can reduce the individual final SG shortfall to nil, the SG charge itself cannot be reduced to zero, as it will include notional earnings and an administrative uplift.
Employers can voluntarily disclose SG shortfalls before the ATO issues an assessment, potentially reducing penalties.
Employers must ensure they pay at least the minimum SG contributions required, which is 12% of an employee’s Qualifying Earnings and align their payment timing with Payday Super’s per–pay–cycle requirements to avoid any SG charge liability.
The ATO understands that employers, payroll systems and service providers face significant operational changes leading up to 1 July 2026 and has published Practical Compliance Guideline PCG 2026/1. The PCG explains the ATO’s proposed compliance approach for the first year of Payday Super. It applies to all employers for any qualifying earnings (QE) day occurring between 1 July 2026 and 30 June 2027.
The compliance approach focuses on risk–based prioritisation rather than blanket enforcement of the legislation. However, the ATO has stated that if it becomes aware that an employer has an SG shortfall for a QE day, it will apply the law even in cases where the employer falls within the Guidelines’ “low–risk” compliance zone.
PCG 2025/D5 focuses specifically on the ATO’s compliance approach relating to superannuation guarantee (SG) shortfalls for each “qualifying earnings (QE) day” occurring between 1 July 2026 and 30 June 2027. It is 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. If an employer is not paying SG for relevant employees as defined in the SGAA or continues to pay SG on a quarterly basis (as under the pre–2026 rules) and makes no attempt to meet the Payday Super requirements 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 following checklists may be used to assist employers, super fund trustees and employees to ensure the smooth transition to Payday Super when it commences on 1 July 2026.
The commencement of Payday Super will require an employer to make more frequent contributions to the fund as well as increased administration. There may be cash flow issues for employers that pay contributions to funds on an irregular basis or at the end of each quarter under the current SG rules.
