Payday plus 7 days

On 14 March 2025, the Treasury released draft legislation for the federal government's (government) previously announced reforms to Payday Super, Treasury Laws Amendment Bill 2025: Superannuation Guarantee (SG) reforms to address unpaid super.

The reforms propose amending the time limits imposed on employers to pay superannuation guarantee (SG) contributions for their employees from a quarterly basis to within seven calendar days of the payment of ordinary time earnings (OTE). The current exposure draft builds on the Treasury's Payday Super factsheet that was released on 18 September 2024 which provided a first glimpse of the proposed reforms.

Set to commence on 1 July 2026, the Payday Super reforms would make sweeping changes to the administration of superannuation in Australia. The reforms-summarised in Table 1 on the next page- are in draft and subject to change following the end of consultation period on 11 April 2025.

Note: In a joint submission to Treasury in early May, eight professional bodies have requested implementation of Payday Super be deferred until July 2028 to ensure a smooth transition to the new model once all stakeholders are prepared.

Employers must be aware of the new Payday Super obligations and ensure their payroll administration systems are ready, or risk significant penalties.

Shorter timeframe to make contributions
Current law

The current drafting of the Superannuation Guarantee (Administration) Act 1992 (SGAA) does not impose an explicit obligation on employers to pay SG contributions for the benefit of their employees. Instead, the SGAA requires that a minimum amount of SG support must be provided to employees to avoid the SGC.

Currently, employers are only required to pay superannuation contributions 28 days after the end of the relevant quarter-that is 28 October, 28 January, 28 April and 28 June. An employer becomes liable to the SGC if they fail to provide the minimum level of SG support to an employee on amounts that constitute OTE for a quarter-subject to certain exceptions. OTE includes many common types of payments for an employee's ordinary hours of work, including ordinary pay, bonuses (excluding for overtime), many types of leave and other regular payments made in respect of an employee's ordinary hours of work at ordinary rates of pay.

Proposed law

The Treasury Laws Amendment Bill 2025: SG reforms to address unpaid super, aims to amend the SGAA to ensure the payment of SG contributions broadly aligns with the timing of the payment of an employee's ordinary pay.

The proposed reforms enshrine an obligation for employers to pay SG contributions for the benefit of their employees if an employer has an individual SG amount. The 'individual SG amount' arises when an employer makes a payment of qualifying earnings to or for an employee on a particular day-known as the "QE day".

Qualifying earnings include not only OTE, but also:

• commissions
• payments to, and remuneration of, persons that are deemed to be employees for the purposes of section 12 of the SGAA
• amounts that have been salary sacrificed in exchange for additional SG contributions.

SG contributions of 12%-from 1 July 2025-must be received by the relevant superannuation fund within seven calendar days after an employer makes a payment of qualifying earnings or the employer will be liable to the SGC. The effect is that employers that pay on-time SG contributions within the seven-day period will reduce their individual base SG shortfalls for a QE day-including to nil, which would avoid imposition of the SGC. Certain time extensions to pay and receive SG contributions apply, including:

• new employees - employers will generally have a 14-day extension to make eligible contributions
• out-of-cycle payments - the Commissioner of Taxation (Commissioner) may by legislative instrument designate certain payments as out-of-cycle payments which extend the SG contribution due date to the next QE day-which will vary from employer to employer. Out-of-cycle payments may include commissions, bonuses, payments in advance and back payments
• exceptional circumstances - include natural disasters and widespread outages of information and communication technology services affecting multiple employers on a large scale, 21 days from the QE day (i.e. a 14-day extension)
• where a stapled superannuation fund provided by the Commissioner does not accept the SG contribution, 42 days from the QE day (i.e. a 35-day extension)
• where an employer's default superannuation fund fails APRA performance tests, 42 days from the QE day (i.e. a 35-day extension).

Additional changes include:

• late payment offsets - currently, employers can elect to pay the SG shortfall to the employee's superannuation fund with the ATO offsetting that amount against the employer's nominal interest component, with the remainder applied to the SG shortfall. These payments will now be automatically applied to reduce an employer's individual final SG shortfall
• maximum contributions base - will be calculated on an annual rather than quarterly basis
• shortfall exemption certificate - amendments to simplify the process, including changing the qualifying conditions to receive an exemption certificate
• defined benefit schemes - amendments to the SGAA to ensure the proposed changes preserve the existing contribution framework with respect to defined benefit schemes.