Employer

Payday Super Legislation is Now Law: What Employers Need to Know

BAS Agent's Blog, Payroll & Superannuation / By / / , , , , , , / 5 minutes of reading

The Australian Government has passed the Payday Super legislation and it has received Royal Assent. Payday Super will take effect from 1 July 2026. This new law requires employers to pay superannuation guarantee (SG) contributions on payday and ensure that funds reach employees’ super accounts within seven business days, instead of quarterly or monthly. If you’re an employer, this blog will help you understand how Payday Super will affect your payroll processes.

What employers need to know

  1. Payment Timing:
    • 1. Super must be paid within seven business days of each payday.
    • 2. If a new employee is hired or an employee changes their super fund, first-time payments must be received by the fund by the end of the 20th business day and after each payday.
    • 3. Super on out-of-cycle or bonus payments may be included in the next regular pay cycle, however this does not apply to the termination of employees.
    • 4. The ATO May extend time-frames for events such as natural disasters or systems outages.
  2. Qualifying Earnings: The law introduces the concept of ‘qualifying earnings’ for super calculations. This concept will replace the dual “salary or wages” vs “ordinary times earnings” model. One qualifying-earnings base will simplify administration. It is important to note that amounts which are salary sacrificed to a superannuation fund count toward qualifying earnings and cannot offset required SG.
  3. Maximum Contributions Base (MCB): The maximum contributions base will now be an annual limit, as opposed to quarterly. The calculation will be Concessional Cap x 100 divided by the current SG rate i.e. $30,000 x 100 divided by 12 = $250,000.
  4. Stricter Penalties: There are tougher penalties for late or missed payments. As per current rules, should contributions be missed or paid late, a penalty known as the Superannuation Guarantee Charge (SGC) is created which includes interest and penalties. This won’t change under Payday Super rules, however the penalties will be more robust including:
    • Administrative uplift: 60 % of unpaid amounts (may be reduced by regulation);
    • Late-payment penalties: 25% – 50% of outstanding charge if not paid within 28 days of notice;
    • Additional ATO penalties: up to 200 % for repeated or unreported breaches.
  5. Tax Deductibility: Late contributions and the SGC will be tax deductible. However, any late payment penalties related to the SGC will not be deductible.
  6. Onboarding: The process for onboarding new employees will need to be more streamlined in order to minimize fund rejection errors, such as incorrect employee master data and choice of fund information. Employers need to consider automated solutions to replace manual processes.

What employers should do now

  • Update Payroll Systems: Ensure your payroll software can process super payments on every payday. Also ensure that the super funds you pay are ready for Payday Super.
  • Educate Staff: Inform payroll and HR teams about the new requirements. Also inform your employees.
  • Review Staff Contracts: The advent of Payday Super will require changes to the wording in employee contracts. It may also affect remuneration for some employees – this requires close scrutiny and review.
  • Monitor Compliance: Regularly check that payments are made on time to avoid penalties. Running some test scenarios prior to the advent of Payday Super would be prudent. This would allow employers to iron-out the kinks and deal with potential bottle necks and issues.
  • Change to Payday super Now: You don’t have to wait until Payday Super begins in July 2026. You can start doing it now as long as your processes and software are up to par. If you start now, you will be able to ensure that all or any issues are removed before Payday Super becomes compulsory.

My opinion

Because it is a pet-hate of mine when employers don’t pay employees’ super on time (or at all), I am 100% in support of Payday Super. This new law will ensure that super gets into employees’ super accounts on time and regularly, rather than quarterly, or longer, or sadly, not at all. More regular super payments will see employees’ super balances increase due to higher interest accrued. All good in my book.

I do note, however, that there will be logistical issues such as the super funds not processing the payments within 7 business days and employers paying the super towards the latter end of the 7 day period. This in turn could expose employers to late payment penalties which may occur through no fault of their own. The tight processing time-frame is definitely going to be a problem.

There will also be cash flow issues for employers. Employers will need to ensure that they have enough funds on hand to pay super on payday, from 1 July 2026 and for each and every payday going forward. The current 3 month grace period will be no longer which could put many employers under considerable cash flow stress. Management of cash flow will become extremely important.

Another issue could lie with software companies not being ready to cope with these changes by 1 July 2026, given this is only 7 months away! This is unlikely, but definitely possible.

Lastly, those employers who outsource the processing of payroll will be hit with higher charges due to the extra administration required on payday to process super payments. What would have been a quarterly or monthly job will now become a weekly, fortnightly, bi-monthly, etc. job, depending on the pay cycle used. This aspect will also affect employers’ cash flow!

Payday Super won’t be without its hiccups, but I do believe it will vastly improve the superannuation system, ensure employees are better off, and stop rogue employers from ducking and weaving when it comes to paying employees’ super.

Key Takeaways

  • The Australian Government passed the Payday Super is law, requiring employers to pay superannuation contributions on payday from 1 July 2026.
  • Employers must ensure super payments are made within seven business days and streamline onboarding processes to reduce errors.
  • The new law introduces ‘qualifying earnings’ for super calculations and a stricter penalties regime for late payments.
  • Employers should update payroll systems, educate staff, review contracts, and monitor compliance ahead of the change.
  • Despite potential cash flow issues and logistical challenges, the Payday Super law aims to improve employee superannuation outcomes.

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A Better Employee Onboarding Experience is coming…

BAS Agent's Blog, Payroll & Superannuation / By / / , , , , , , / 3 minutes of reading

The way new employees are onboarded is changing. Currently, employers ask new employees to provide a Tax File Number Declaration form, a Super Choice form, and also other personal information required in order to set them up in their payroll systems.

While this process is fairly straightforward, often employers find themselves chasing new employees for the data and at times, needing to confirm details that may or may not be correct (usually not correct in my experience!). This process can therefore be very time-consuming and tedious for employers, not to mention that the room for error is very high. It is also not a great deal of fun for new employees either!

Enter the “New Employment Form”.

This is an all-in-one onboarding form that new employees access from their myGov accounts. The form will provide both the ATO and the employer with all of the information required to set up new employees in one easy action.

Importantly, this form will replace several forms. These include the Tax File Number Declaration, the Super Choice form, the Variation to Tax Withholding Declaration, the Variation to Medicare Levy Declaration, etc. Employees can also use it to update their tax circumstances, for example, if:

  • their residency status has changed
  • they no longer have a government study and training loan
  • they are claiming the tax-free threshold from a different employer.

This change to employee onboarding will reduce the administrative burden for employers and increase process efficiencies. It will also reduce data recording errors which are very common when obtaining personal details from new staff members.

How the new onboarding process works

Firstly, the employer needs to provide his/her ABN to the new employees.

To access the new form, employees will require a myGov account linked to the ATO. Once signed in they will:

  • access ATO online services
  • go to the ‘Employment’ menu
  • select ‘New employment’ and
  • complete the form then
  • submit the form

After submitting the form, the details will be sent straight to the ATO removing the requirement for employers to send completed TFN Declarations separately. It’s important to note that the changes to Single Touch Payroll Phase 2 have also made this possible i.e. every time a pay run is reported via STP 2, employees’ tax information is sent to the ATO. Although this step can now be removed from the onboarding process, employers must continue to receive completed TFN Declarations from new employees and retain them as part of the employees’ records.

Once the form is submitted, the employee will print the form and give it to the employer who will use the information to set up the employee in the payroll system.

It’s important to note that the downloadable version of the TFN declaration form will be removed by the end of 2022.

 The ATO is therefore requiring new employees to be onboarded using the new above process going forward. This is a new process that both employers and employees need to understand and adopt. It has benefits in terms of efficiency and data security and in my opinion, is the way forward.

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Employing staff and Coronavirus: Fairwork directions

BAS Agent's Blog, COVID-19, Payroll & Superannuation / By / / , , , , , / 3 minutes of reading

Coronavirus (COVID-19) has brought with it great uncertainty and worry amongst the general population, not the least of these, employers and staff. There are many unknowns relating to how to manoeuvre in these difficult times as an employer, especially in terms of ensuring staff are treated correctly and fairly. Recently, Fairwork released some direction for employers on their website. We advise you read the bulk of the details on their page yourself but we do provide a “taste” of the information provided below.

My employee (or his family member) has Coronavirus. What now?

You must direct the employee not to come to work and to only return when s/he has been given medical clearance. If the employee is part or full time, s/he will be able to take paid personal/carers leave. Casual workers will need to take unpaid leave given they do not receive leave entitlements. Workers refusing to use their leave entitlements are not required to be paid. You can ask the employee for evidence of the illness or emergency i.e. doctor’s certificate if required.

My employee wants to stay home to avoid contact with others.

In this case, you need to discuss this with the staff member and come to an agreement that suits you both. If working from home is an option and your staff member agrees to do so, then make arrangements together to ensure this can occur easily and smoothly. If the employee cannot work from home, then you must decide if paid or unpaid leave will be provided. Where an employee refuses to take paid leave (where it is available), then that employee cannot be paid.

I want to tell my employee/s to stay home.

From Fairwork: ” Under workplace health and safety laws, employers must ensure the health and safety of their workers and others at the workplace as far as is reasonably practicable. ” If you believe that it would be best to instruct your staff to stay home due to possible risks from COVID-19, then you certainly can do so. You can organise a “work-from-home” scenario where possible or if not possible, you can direct staff to remain off site but you must be aware as per Fairwork ” where an employer directs a full-time or part-time employee not to work due to workplace health and safety risks but the employee is ready, willing and able to work, the employee is generally entitled to be paid while the direction applies”, and also “standing down employees without pay is not generally available due to a deterioration of business conditions or because an employee has the coronavirus.”

I want to direct staff not to travel.

While you can direct your employees not to travel for work-related events, meetings etc because you want to reduce the risks associated with COVID-19 at your workplace, you cannot ask them to cancel personal travel/trips.

So, in summary, you need to ensure your workplace is safe and you can do this by keeping unwell employees at home and/or all staff at home if required. If your business is structured in such a way that working from home is possible, then certainly bring that to the table and discuss with staff how best to handle that scenario. Part and full time staff should take personal leave if affected by the virus or unpaid leave if they prefer. Similarly, if staff unaffected by COVID-19 request to remain at home and also cannot work from home, they must opt to take annual or unpaid leave. If you direct staff to stay home and there isn’t any evidence that they have been affected by COVID-19, that is, they are well and able to work, then you must continue to pay them as normal. To read the full list of instructions provided by Fairwork, download their factsheet below.

Coronavirus and Australian workplace_Fair_Work_OmbudsmanDownload

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Quick-start guide for new employers

BAS Agent's Blog, Payroll & Superannuation / By / / , , , , , , , / 4 minutes of reading

So you’re going to start employing staff. That’s great, this usually means your small business is booming, so well done to you! Before you don your employer’s hat however, you need to make sure that you have all of your ducks in a row. There are quite a few things you need to do so to that end, we have created a quick-start guide for new employers. Our guide will tell you what you need to know, supply crucial documents and provide links to important information. Pop this blog link in your favourites for quick access as you will find it useful each time you on-board a new staff member.

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Quick-start guide for new employersRead More »

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