On July 1, 2026, a significant change will be implemented in Australia’s superannuation system that will affect employers and employees alike. From that date, all employers will be required to pay their employees’ super contributions at the same time their salary/wage is paid. This change, known as Payday Super, has been implemented by the Albanese government as part of a broader initiative to reform superannuation in Australia.
The Payday Super system is a significant win for the three million Australians who are mostly young and lower-paid, who have been unfairly deprived of their earned super and will now have a better chance of building a substantial nest egg for their retirement. This change aims to bring super payments in line with wages to give millions of Australians a more dignified retirement and reduce the country’s unpaid super problem, which has cost $33 billion over seven years.
Benefits of Payday Super for Employees
With Payday Super, employees will receive more frequent super payments, which will allow them to save more due to higher compounding interest. This will help employees build their retirement savings more quickly and ensure that they have a more comfortable retirement.
Moreover, the Payday Super system will make it harder for disreputable employers to take advantage of their employees by giving them greater visibility over their super contributions. This will be particularly beneficial for the casual and insecure workforce, which is made up of a large proportion of women. Future reforms, including the government’s review of the best timing for super payment on the Commonwealth Parental Leave Pay scheme, will also benefit women and improve their retirement outcomes.
Benefits of Payday Super for Employers
While some employers may be concerned that increasing the frequency of super payments might burden them, this is not the case. More frequent super payments will make employers’ payroll management smoother, with fewer liabilities building up on their books. With digital innovations like SuperStream and single-touch payroll, super payments are automated, requiring no extra manual effort.
Pay Day Super offers a number of benefits to employers. Firstly, it streamlines the superannuation contribution process, as employers can make all their super payments in one go on pay day, saving time and administrative costs. Secondly, Pay Day Super in Australia can also provide benefits for business cash flow. As superannuation contributions are generally calculated as a percentage of an employee’s ordinary time earnings, employers can plan and budget for these payments in advance, which can assist with cash flow management. By making superannuation contributions on pay day, employers can align their cash flow with their payroll obligations, ensuring that funds are available to cover both expenses. Additionally, Pay Day Super reduces the risk of late payment penalties, which can have a negative impact on cash flow. By making timely super contributions, employers can avoid the additional costs and cash flow disruptions associated with penalties and interest charges due to needing to complete a Super charge Statement. Thirdly, Pay Day Super helps employers attract and retain employees, as it demonstrates a commitment to providing a valuable employee benefit. Finally, Pay Day Super provides peace of mind for employers, as it ensures that their employees are building a secure financial future and reduces the risk of potential legal disputes arising from non-compliance with superannuation regulations.
Moreover, the Payday Super system is a winning formula as it will make it harder for employers to dodge paying superannuation. About 2.5 million employees missed $4.3 billion in super in 2019-20, with over a quarter missing an average of $1,736 per year, according to Industry Super Australia (ISA). The Australian Tax Office (ATO) more conservatively estimates there is about $3.4 billion in unpaid super each year, based on its compliance activities.
To address this problem, the ATO will receive additional resources to detect unpaid super payments early, and the Government will set enhanced recovery targets for the ATO. In the second half of this year, Treasury and the ATO will consult closely with industry and stakeholders on these changes.
How Employers can Ensure Compliance with Payday Super
Payroll software solutions like Xero can help businesses stay compliant with all the relevant regulations and laws. By automating specific tasks and processes, businesses can minimise the risk of human error and ensure they remain compliant. With Xero payroll solutions, businesses can minimise compliance risk and ensure their employees get paid on time.
In summary, the introduction of Payday Super will be a significant change in Australia’s superannuation system, benefitting both employers and employees. Employers will benefit from more manageable payroll operations, while employees will receive more frequent super payments and greater visibility over their contributions, which will make it harder for unscrupulous employers to take advantage of them. Moreover, this change will strengthen Australia’s superannuation system, which will provide millions of Australians with a more dignified retirement. Employers should ensure they are prepared for the changes and utilise payroll software solutions to remain compliant.
Here at Gecko Bookkeeping we help businesses stay up to date with changes to the superannuation regulations and provide advice and best practices. We can help your business transition to pay day super as these changes are implemented.