As part of the 2023-24 Federal Budget, the government announced a new reform known as “payday super”, aimed at modernising the way superannuation contributions are made. A recently released government fact sheet sheds light on the key aspects of this new policy and what it will means for both employers and employees.

Currently, employers are required to pay superannuation guarantee (SG) contributions quarterly, but starting from 1 July 2026, that will change. Under the new system, SG contributions will need to be made on “payday” – the same day that employees receive their ordinary time earning (OTE). Essentially, when employees get paid, their super contributions will also need to be sent to their super fund. Employers will have a seven calendar day window from payday to ensure that the payment arrives in the employee’s super account.

While this new rule will streamline super payments, there will be a few exceptions. For example, small or irregular payments that fall outside the usual pay cycle, as well as contributions for employees who are just starting a new job, may be handled differently.

To make sure employers stay on track with their super obligations, the SG charge framework is being updated as well. Under the payday super system, employers who repeatedly fail to make their super payments on time will face stiffer penalties. On the bright side, the new framework will make things a bit easier for businesses when they miss a deadline. Late super contributions will automatically be applied to the earliest payday that hasn’t been assessed yet, so employers won’t have to manually choose which period the late payment should apply to.

Several other changes will come into effect as part of this reform:

• Super funds will have less time to process contributions, with the deadline to allocate or return funds shrinking from 20 business days to just three days. This should help employees see their contributions reflected in their super accounts faster.
• Employer reporting through Single Touch Payroll (STP) will be expanded. Employers will now have to report both the employees’ OTE and the total super liability, which will help ensure that super contributions are calculated and paid correctly.
• The ATO’s Small Business Superannuation Clearing House, a free service currently available to small businesses to help them manage super payments, will be retired on 1 July 2026. The ATO will work with small businesses to transition them to suitable payroll software solutions.
• The rules around choosing a super fund will also be revised, making it easier for employees to nominate their preferred fund when they start a new job. This change aims to simplify the process for both workers and employers.
• Another significant change is that dvertising of super products during employee onboarding will be limited to MySuper products that have passed the most recent performance test. This is designed to protect employees from being steered toward poorly performing funds when they’re just starting with a new employer.

These reforms are aimed at ensuring superannuation contributions are paid more promptly and accurately, while also providing additional safeguards for employees to prevent them from ending up in underperforming funds. For business, it will mean some adjustments, particularly in terms of payroll processes, but overall, it’s a step toward a more efficient and transparent system.