On 9 October 2025, the Australian Government introduced draft legislation into Parliament that will fundamentally change how and when employers pay superannuation guarantee. Known as the Payday Super Australia 2025 reform, this measure is designed to improve retirement outcomes by ensuring employees receive their super contributions more frequently and transparently.
This article outlines the key elements of the newly introduced draft legislation, the proposed implementation timeline, and what employers should be doing now to prepare for in advance of its introduction.
The Legislative Package
The PayDay Super reform is implemented through two Bills:
- Superannuation Guarantee Charge Amendment Bill 2025.
- Treasury Laws Amendment (Payday Superannuation) Bill 2025.
These Bills give effect to the Government’s previous commitment, first announced in the 2023–24 Federal Budget, to align superannuation guarantee payments with payroll cycles. The aim is to reduce unpaid or late paid superannuation guarantee amounts, improve superannuation guarantee compliance, and enhance retirement savings for millions of Australian employees.
When Will It Start?
If passed as expected, the new laws will apply from 1 July 2026. From that date, employers will be required to pay Superannuation Guarantee (SG) contributions on payday, rather than quarterly.
Key Features of the Payday Super Australia 2025 Reform
1. Payday Super Becomes Law
Employers must ensure SG contributions are paid at the same time as salary and wages. Contributions must be received by the employee’s super fund within 7 business days of payday.
There are several key modifications to the original draft legislation, which have been made as a result of consultation, including:
- A welcome change sees employers with 7 business days (rather than calendar days), leaving some additional time to ensure contributions are able to be allocated.
- There is also an allowance for more time for the fund to make the allocation, with the employer to not be penalized if the actual allocation of the SG contribution occurs more than 7 days after pay day (unless the contribution is not allocatable i.e. it is rejected). Superfund will now also only have 3 business days to either allocate or reject contributions.
- An extension for new employees and employees changing superannuation funds of 20 calendar days to cover payday events falling within that initial period.
- ATO discretion on extensions by prescribing other exceptional circumstances, including IT outages and natural disasters.
2. New ‘Qualifying Earnings’ Concept
SG will be calculated based on “qualifying earnings” (QE), which aligns with actual pay cycles and ensures contributions reflect real-time earnings. This QE concept is used to calculate both the SG contributions and SGC.
Qualifying earnings are the amount of earnings an employee is paid on which individual SG amounts are calculated. This is a new term, which relies on and streamlines existing concepts such as OTE.
Qualifying earnings consists of:
- OTE, which is an existing concept and the Bill does not change the substance of the provisions that define the scope of OTE, and this amount is calculated the same way as it was under the current SG framework for most employees.
- Amounts of OTE that have been sacrificed in exchange for an additional superannuation contribution under a salary sacrifice arrangement.
- Payments that were expressly included within ‘salary or wages’ under the old law for arrangements that fall within the extended meaning of employee for the SGA Act.
3. Revised Super Guarantee Charge (SGC)
The SGC regime will be modernized: A scalable administrative uplift replaces the fixed penalty – Employers will have an initial administrative uplift amount of 60 per cent of the sum of:
- The administration component of their individual final SG shortfalls and individual notional earnings components for a QE day. The administrative uplift may be reduced (including to, but not below, nil).
- General interest charges apply to the total SG charge – The individual notional earnings component for an employee is calculated by applying the general interest charge rate to the individual base SG shortfall, on a daily compounding basis until the day a late eligible contribution is made that reduces the relevant individual final SG shortfall for the employee to nil, or otherwise until the day an SG charge assessment is made.
- A “choice loading” penalty applies for breaches of fund choice rules – a choice loading applies where an employer makes one or more contributions to a complying superannuation fund or RSA for the benefit of an employee, and the contribution is not made in compliance with the choice of fund requirements. The choice loading is a separate component of the SG shortfall. The choice loading is an additional 25 percent calculated on the value of the eligible contributions for any QE day where the employer has failed to comply
4. SuperStream Enhancements
The ATO will introduce new digital services, including:
- Improved error messaging.
- Member Verification Requests to reduce payment failures.
5. Closure of the SBSCH
The Small Business Superannuation Clearing House will close to new users from 1 October 2025 and to all users from 1 July 2026.
6. ATO Compliance Approach
Employers are required to report both Qualified Earnings and the actual superannuation guarantee liability amount via Single Touch Payroll (STP).
The ATO has also released draft PCG 2025/D5, outlining the ATO’s approach to compliance in the initial 12 months of operation of the new legislation. Essentially, the draft PCG outlines that the ATO do not propose to take action where an employer makes reasonable efforts to comply with the new rules. This appears to be a supportive compliance posture for the first year of implementation, without allowing employers the ability to request the formal extensions that were offered with respect to the introduction of Single Touch Payroll.
Employers acting in good faith will be supported through education and rectification rather than penalties. Employers who fall into high-risk categories (i.e. those where the STP data shows actual shortfalls arising) will be prioritised for an investigation.
How Employers Can Prepare for Payday Super Legislation in Australia
1. Review Payroll Systems
Ensure your payroll software can support real-time SG payments and is aligned with STP Phase 2 and SuperStream updates.
2. Ensure Payroll Team Training
Ensure your payroll team receives adequate training and is aware of the new obligations on the business as an employer, including not only the new requirements but the consequences of failing to meet these.
3. Model Cash Flow Impacts
Moving from quarterly to per-pay-cycle payments may affect cash flow. Early modelling is essential, particularly for small and medium-sized businesses.
4. Engage with Providers
Work with your payroll providers and the clearing houses for super funds to ensure readiness for increased transaction volumes and new reporting deadline requirements.
5. Communicate with Employees
Prepare to explain the changes to employees, including the benefits of more frequent super payments and how they will see these reflected in their superannuation guarantee fund accounts.
6. Monitor ATO Guidance
Stay up to date with ATO publications, including final guidance on PCG 2025/D5 and SuperStream implementation updates.
Conclusion
The Payday Super Australia 2025 reform represents a significant shift in employer obligations and payroll operations. While the July 2026 start date provides some runway, the complexity of implementation means employers should begin preparing now.
By acting early, businesses can ensure compliance, avoid penalties, and be able to give confidence to the Board that all obligations are met for employees.
At Andersen Australia, we understand the complexities of implementing the new Pay Day Super legislation and are well positioned to assist employers with ensuring they are prepared and compliant to avoid the potential risks which will arise under this new regime.
