BDO takes a look at the latest details of the proposed Payday Super regime which is set to commence on 1 July 2026.
The Treasury has released a fact sheet on 18 September 2024 regarding the draft legislative policy design for the new Payday Super regime due to commence on 1 July 2026.
In October 2023, the Treasury released a consultation paper on Securing Australians’ Superannuation (Payday Super) and BDO prepared a submission response.
The consultation paper was based on the announcement in the 2023-24 Federal Budget that employers will be required to make superannuation guarantee (SG) contributions on the same day they pay salary and wages rather than quarterly.
BDO Private Wealth, Senior Consultant, Peter Crump said the regime was intended to improve fairness to employees by accelerating the pace at which their employer super contributions are made.
“The current system legally allows employers to bank up super contributions, to be made on a quarterly basis. This has resulted in some employers going out of business and not paying the super contributions which should have gone to their employees’ super accounts,” Crump said.
“It will bring forward the cash flow needs of businesses and will make the management of customer debtors even more important. This could result in a greater use of progressive invoicing for professional services in particular.
“For small businesses, cash flow and debtor management will become more important from 2026 onwards.”
He added that the regime was an extension of the live reporting of employment data to the ATO using the single touch payroll systems.
“This will give the ATO greater ability to monitor, catch and remediate employers who are not doing the right thing. But it may come at the cost of some small businesses having greater difficulty in managing their cash flow,” he said.
“The ATO will have more timely data available to it, but will be under pressure to make sure it uses the data to identify and fix problems before it is too late.”
BDO executive director, tax, Judy White welcomed the proposed framework for the new regime which will allow employers to gain more informed insights to be prepared for the upcoming changes.
But more work is required to ensure that unintended consequences and practical difficulties do not arise from this proposed framework, White said.
“For example, the seven-day due date rule applies to calendar days, which will reduce the turnaround period significantly once take into account weekends, and also public holidays. It is our view that employers should only be required to make the payment within the seven calendar days, and not be held accountable for the payment to reach the employee’s super account. Where circumstances arise out of the employer’s control after the payment has been made, it is the employer that is liable to the SG charge,” White said.
“It is disappointing that employers will remain responsible for circumstances they cannot control under this proposed policy design framework.
“Also, the three business day period for super funds to allocate or return contributions is a significant reduction from the current 20 day period, and raises the question as to what penalty will be levied and who is liable where the three day period is breached. For example, would the entity liable for the penalty be the super fund or the employer, and will the penalty be in the form of the SG charge?”
Further, there is uncertainty regarding the revised administration component and how it will be applied, with a risk that costs could result for employers.
“Further, the policy changes rely on technologies that are not cost effective for small and medium sized entities, and it would require significant work to develop the software capabilities for the proposed regime requiring significant period of time to address,” White said.
“It is disappointing that the Treasury has proposed cessation of the SBSCH. The SBSCH provides a valuable no-cost solution to many employers, especially small business.
“In relation to the proposed start date for the new regime of 1 July 2026, it is our view that this is an unrealistic target to achieve, certainly in order to ensure we have a robust efficient and effective system in place. We suggest that a staged approach to the implementation of the Payday super regime is required, for example, larger employers first and a gradual introduction to remaining employers over several years, and extension systems in place for software providers.”
Reach out to a 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.