The Government’s payday super reforms have taken another step towards implementation with the introduction of legislation to Parliament. Requiring employers to pay employee super contributions on payday, the reforms are designed to ensure that employees benefit from more frequent and earlier super contributions that grow and compound over their working life and reduce instances of unpaid super.
On the most recent financial year data, the ATO has estimated that $5.2 billion in super went unpaid by employers, with unpaid super disproportionately having an impact on those in lower paid, casual and insecure work. The impact of the reforms could be particularly significant for these workers, with the government estimating that for a 35-year old in a typical unpaid super case, recovering their super could result in their balance being more than $30,000 better off at retirement.
What’s new in the legislation?
The newly introduced legislation includes some changes from the earlier drafts released for consultation in March, including:
- contribution timeframes are now measured in “business days” rather than “calendar days”;
- employers will now have 20 business days (previously 21 calendar days) to make contributions for new employees, and this additional time will also apply to contributions made to existing employees that have changed to a new fund;
The legislation still needs to pass through both the House of Representatives and the Senate before it becomes law, but you shouldn’t wait to start planning.
ATO’s first-year compliance approach
Recognising that employers need time to deploy, test and embed changes in their payroll systems and business processes, the ATO has released PCG 2025/D5. The draft guideline outlines the ATO’s proposed compliance approach for the first year of operation of the payday super law (1 July 2026 – 30 June 2027), using a risk-based framework. Employers will be categorised into 3 risk zones:
- Low risk: As an employer, if you’re genuinely making an effort to comply with the new rules, making timely contributions, and quickly correcting any errors that arise, the ATO won’t have cause to review your actions for compliance.
- Medium risk: If you don’t fit the low-risk criteria, you may fall into this zone, eg if you’re transitioning to the new rules and have made contributions in full, but some are late; or the correct contributions have been made but you haven’t yet aligned your payment frequency with your pay cycles. The ATO may apply compliance resources for investigation, but prioritise this zone behind the high-risk zone
- High risk: The highest priority resourcing by the ATO will be dedicated to this zone. Employers falling into the high risk zone have not paid the minimum amount of super contributions for their employees.
Examples are provided in the guideline to illustrate risk zones, how the ATO will prioritise resources and investigate employers. While the examples won’t cover every circumstance, they can give you an understanding as an employer as to the risk categories and the ATO’s response.
Comments on the draft Guideline can be submitted to the ATO until 7 November 2025.
What next?
If you’re an employer, start preparing now: review your payroll systems and processes to ensure they are ready for payday super by 1 July 2026; more frequent super payments could have cash flow implications that you should consider; and look for alternatives if you use the SBSCH, as it will be closed from 1 July 2026. Planning ahead will help you be compliant with the law and make a smooth transition.
Keep an eye on developments as the legislation progresses through Parliament and as the ATO finalises its compliance guideline. Changes could still be made before the reforms take effect.
