Draft legislation that will require super to be paid at the same time as wages has now been released for consultation.
According to the Government, the legislation for payday super will aim to substantially reduce the billions of dollars in unpaid superannuation every year.
The reforms, which commence on 1 July 2026, will require employers to pay their employees’ super at the same time as their salary and wages.
The proposed legislation introduces a new term, qualifying earnings, which is the amount of earnings an employee is paid on which individual SG amounts are calculated.
Qualifying earnings use the existing earnings base for contributions under the current law, currently called the Ordinary Times Earning (OTE) base.
Qualifying earnings will consist of:
- OTE as it is defined and calculated under the current SG framework
- Amounts of OTE that have been sacrificed in exchange for an additional superannuation contribution under a salary sacrifice arrangement and
- Payments that were expressly included within ‘salary or wages’ under the existing law for arrangements that fell within the extended meaning of employee for the Superannuation Guarantee (Administration) Act.
The day that qualifying earnings are paid to an employee will be referred to as a QE day under the proposed legislation.
Under the amendments, superannuation guarantee (SG) contributions will need to be received by the superannuation fund within a specified period, which will usually be 7 days from the day on which employees are paid their qualifying earnings.
The amendments also update the calculation of the SG charge and impose a late payment penalty when the SG charge remains outstanding after a specified period. A recalibrated calculation of the SG charge will better ensure employees are accurately compensated for lost earnings if their contributions are delayed.
Obviously, it will prompt employers to immediately rectify any late or missed payments and deliver more significant consequences and penalties for ongoing and repeated non-payment of the SG charge.
The Government believes that payday super would make it easier for employers to manage their payroll by paying super at the same time as salary and wages. The new law will also streamline the way super is paid by employers to make it easier to meet their obligations.
This change will strengthen Australia’s superannuation system and help deliver a more dignified retirement to more Australian workers, in line with the objective of super.
What affect it will have on a businesses cashflow is a different question?
The superannuation industry body said it was committed to ensuring that payday super is not only implemented in an orderly and controlled manner but also delivers real benefits for Australians’ retirement outcomes.
Get ready and stay tuned as we are sure there will be some changes along the way. We will keep you updated as this gets closer.
Prepare now
If you would like to discuss how this legislation will impact your business and how you can prepare with cashflow planning, we are here to support and advise you, please contact us.