Payday Super regime – draft legislation released
Payday Super regime – draft legislation released
On 14 March, the Government released its long-awaited draft legislation to reform the Payday Super regime, Treasury Laws Amendment Bill 2025: SG reforms to address unpaid super. The proposed Payday Super legislation introduces significant changes that will impact how superannuation contributions are managed by employers, with employers required from 1 July 2026 to pay their employees' super at the same time as their salary and wages.
Key aspects of the proposed changes
The important proposed policy changes are as follows:
Unchanged definition of ‘Paid’
The legislation maintains the existing definition of when superannuation contributions are considered paid. Contributions are only deemed paid when they reach the employee's super fund, except for instances using the Small Business Superannuation Clearing House (SBSCH). This could potentially expose employers to liabilities beyond their control, even if contributions are made promptly after payday.
Seven-day processing requirement
Under the new legislation, employers are required to process super contributions into the employee’s super fund within seven calendar days of payday. This remains unchanged from the framework released previously, with no differentiation between business days and calendar days.
Cessation of SBSCH
Effective from 1 July 2026, the Small Business Superannuation Clearing House (SBSCH) will cease operations. Small businesses will no longer have the option to treat super contributions as paid upon processing by the clearing house, aligning them with other employers who must ensure timely payments directly to super funds.
Impact across payroll frequencies
Regardless of payroll frequency—weekly, fortnightly, or monthly—the new regime applies uniformly. Weekly payrolls will see a notable increase in the frequency of super contributions, requiring approximately 13 payments per quarter instead of the previous quarterly payment schedule.
Changes in penalty regime
The proposed legislation introduces a revised penalty regime where repeat non-compliance will attract penalties up to 50 per cent, compared to the current maximum of 200 per cent which can be remitted by the ATO. This stricter approach aims to deter ongoing breaches, although innocent offenders may also face penalties, particularly if they have previously been liable within the last 24 months.
Annual maximum contribution base
A positive change includes shifting the maximum contribution base from quarterly to annual calculations. This adjustment aligns with the annual concessional contributions cap for employees, potentially simplifying compliance for employers and reducing inadvertent breaches.
Interest and administration component modifications
The legislation proposes replacing the current 10 per cent nominal interest rate with the ATO's General Interest Charge (GIC) rate, currently at 11.42 per cent for March 2025. Additionally, the administration component will no longer be a fixed $20 per employee per quarter but will be subject to a 60 per cent uplift based on the total shortfall and interest, with discretionary reductions for voluntary disclosures.
Replacement of SG statements
Under the new system, SG statements will be replaced with voluntary disclosure statements, streamlining the compliance process for employers while allowing for potential reductions in administrative penalties.
Tax deductibility of SG charge
A significant change includes making the Super Guarantee (SG) charge tax-deductible, enhancing the tax outcomes for employers. However, penalties will remain non-deductible under the proposed legislation.
BDO Comment
These proposed changes signify a pivotal shift in how employers manage superannuation obligations. With the potential commencement date approximately 15 months away and amidst ongoing legislative developments, proactive preparation is crucial.
Reach out to your BDO adviser from our tax services team if you would like further information regarding the proposed changes or how our team of experts can help you.