What’s trending: Explaining Payday Super – a new compliance regime

On 9 October 2025, the Federal Government introduced draft Payday Super legislation into Parliament (the Bill), confirming that the measure is set to take effect from 1 July 2026. On the same day, the ATO released Draft Practical Compliance Guideline PCG 2025/D5 (the Draft PCG), which sets out the concessional component of the ATO’s approach to compliance for the first year of Payday Super. 

Whilst the Bill is not yet law, employers now have greater certainty around how the new Payday Super regime will operate, as well as the changes required ahead of the go-live date. 

The Bill clarifies concepts previously introduced in the Payday Super draft legislation, such as the introduction of Qualifying Earnings (QE) as a single earnings base used to calculate SG, and the ‘QE day’, being the day on which QE is paid to an employee (or, in simple terms, the payday). These measures will replace the current SG system which requires remittances on a quarterly basis.  

To summarise the key requirement under Payday Super, an employer must: 

• calculate SG on an employee’s QE and make an eligible contribution that is ‘able to be allocated’ to a superannuation fund before the end of the seventh business day after the QE day (subject to certain exceptions, such as for new starters), and
• comply with choice of fund requirements. 

The term ‘able to be allocated’ is a new concept within the Payday Super regime and means that a superannuation fund must be able to identify and allocate the contribution to an employee’s fund account using details provided by an employer. If a contribution is rejected by the fund based on incorrect or incomplete details, the contribution is not ‘able to be allocated’. 

Where an employer does not meet these requirements, the Bill’s redesigned Superannuation Guarantee Charge (SGC) regime and the ATO’s data-matching capabilities will administratively result in employers receiving an assessment of SGC from the ATO, unless the employer identifies and voluntary discloses the SG shortfall in advance of the assessment arising. 

In addition to SG being payable on each QE day, the Bill also introduces the following changes:  

• Maximum contributions base (MCB): The contributions cap will move from a quarterly assessment to an annual one. 
• Shortfall exemption certificate process: In recognition of employees now reaching the MCB early on in the financial year, a shortfall exemption certificate can now be requested where an employee changes employers partway through a year. This protects employees from exceeding their maximum concessional contribution base due to receiving superannuation from two employers despite having exceeded the MCB. The shortfall exemption certificate was previously applicable only where an employee worked for two or more employers concurrently. Additionally, the timeframe for applications has been reduced from 60 days to 30 days before the first day of the period for which the exemption is sought. 
• SGC and penalties: There have been a number of significant changes with regard to the SGC regime.
  • First, the Commissioner of Taxation will now have the ability to unilaterally assess an employers’ SG shortfall, based on data gathered from sources such as Single Touch Payroll (STP) and superannuation fund reporting. Currently, the Commissioner’s approach is to commence audits in circumstances where they become aware of an expected SG Shortfall (e.g. an employee lodges a direct complaint with the ATO).  
  • The redesigned SGC will now comprise the final SG shortfall, notional earnings (akin to the current nominal interest), an administrative uplift component of up to 60% of the SG shortfall and a choice loading where ‘choice of fund’ rules are breached. 
  • In welcome news, employers will now be able to claim the SGC and late superannuation payments as an income tax deduction. Penalties and general interest charges on unpaid SGC amounts will not be tax deductible. 
  • In addition, based on the draft regulations, full remission of the administrative uplift component is available if a voluntary disclosure is made within 30 days and the ATO has not previously initiated a unilateral Assessment. 
  • SGC statements will be replaced by this new voluntary disclosure process. 
  • A failure to either pay the SGC or lodge an objection within 28 days of a Notice being issued can trigger a late payment penalty, which will be an additional 25% or 50% of the of unpaid notice amount, based on whether the employer had received a late payment penalty within the previous 24 months.  
• Concessional dates: Employer representatives raised concerns during the draft legislation consultation process that employers would be subject to the SGC for late contributions, including where delays were outside an employer’s control. To address these concerns, the Bill outlines three exceptions providing employers with additional time to make SG contributions:

1. An ‘extended usual period’ applies providing employers with additional time to make SG contributions if paying a new employee for the first time or making contributions to an employee’s new superannuation fund. In these circumstances, an employer will have 20 business days from the QE day to make an eligible contribution.

2. Employers will have an extension to the end of the next QE day to make contributions for out-of-cycle payments. These can include commissions, bonuses, advance payments and backpay to be determined by the ATO through a legislative instrument.

3. The Bill also allows for the ATO to grant extensions to employers in exceptional circumstances, such as natural disasters or widespread technological failures. 

• Transitional provisions: The Bill also introduces new rules to manage the transition period between the existing and proposed SG regimes, ensuring that the ‘old SG Act’ will continue to apply to arrangements for the payment of SG and SG charge made prior to 1 July 2026. Employers with remediation requirements spanning the pre and post Payday Super commencement date will need to remediate under two separate sets of rules, which will add a layer of complexity, particularly to the employee communications process. 

These changes represent a significant update to the long-standing current SG framework, underpinned by the Federal Government’s goal of closing the stated $5.2bn annual SG compliance gap. However, there have also been key changes put in motion outside of the Bill to support more timely superannuation payments and closure of the compliance gap. These include: 

• Upgrades to SuperStream to improve fund validation and error messaging: The ATO has released updated guidance on SuperStream standards and Fund Validation Services (FVS), with the aim of improving error handling and an upfront reduction in erroneous accounts. 
• STP enhancements to require reporting of Qualifying Earnings: The ATO has advised Digital Service Providers (payroll software providers) that, from 1 July 2026, STP reporting must include QE (code ‘Q’) and the superannuation liability, or portion of pay subject to SG (code ‘L’).  

The ATO released the Draft PCG on the same day as the Bill was introduced to Parliament, outlining the ATO’s compliance approach in the first year of Payday Super.

The Draft PCG acknowledges the challenges that many employers may face in meeting the new regulatory environment and provides assurance to employers around the steps they need to take to ensure they are not the subject of proactive SG case selection by the ATO.

The Draft PCG categorises employers into three risk zones: 

• Low risk: where an employer has made a late eligible contribution, but these contributions were received by the relevant funds and allocable to employees as soon as reasonably practicable (noting this term is not defined or quantified in the Draft PCG).
• Medium risk: where an employer makes eligible contributions to reduce the final SG shortfalls for all employees to nil before 28 days after the end of the quarter in which the QE was paid. 
• High risk: where an employer has a final SG shortfall for their employees after 28 days after the end of the quarter in which the QE was paid. 

The Draft PCG does not extinguish an employer’s obligations to comply with Payday Super and remediate SG shortfalls if they are low risk. Instead, it outlines the high risk and medium risk employers who will be subjected to proactive case selection by the ATO. Proactive monitoring and elimination of SG shortfalls remains as important as ever for employers to ensure they situate themselves into the low-risk categorisation and keep ahead of any employee-initiated approaches to the ATO, which would likely lead to the ATO investigating the alleged SG shortfalls, regardless of the above risk zones. 

Payday Super may not officially commence until 1 July 2026, but the foundations for it are being laid today. The Bill, the ATO’s Draft PCG, updated SuperStream framework, and enhanced STP reporting are clear signs of this progress. 

Payday Super is more than just faster contributions; it affects every aspect of the superannuation lifecycle. Therefore, whilst the law has yet to be passed by Parliament, employers should take the opportunity to familiarise themselves with the intricacies of Payday Super now. 

We will soon be releasing a further article that will explore our recommendations of what employers can do ahead of the go-live date, to better navigate the ATO’s data‑driven compliance approach under Payday Super. 

If you have any further questions about Payday Super, please reach out to your PwC Workforce advisor. In addition, please register for our Workforce Leaders’ Forum: What does Payday Super readiness look like?.