Payday super checklist before July’s changes

Garreth Hanley:
This is With Interest, a business, finance and accounting news podcast brought to you by CPA Australia.

Tahn Sharpe:
Hello and welcome to CPA Australia's With Interest podcast. I'm Tahn Sharpe, editor of INTHEBLACK. With just a few months to go until one of the biggest changes in Australia's superannuation system in decades. Today we're returning to payday super, but this time with a very practical focus on what businesses should be doing right now to get ready for July.

Joining me today is Richard Webb, CPA Australia's superannuation lead. Richard has been closely involved in policy discussions on payday super and has been tracking the ATO's latest guidance as we move into the final implementation phase. Richard, welcome back.

Richard Webb:
Thanks, Tahn, and it's good to be back.

Tahn Sharpe:
Now, Richard, we spoke about payday super in late 2025. We're now at the end of Q1 in 2026, and there is a little over three months to go before it comes into effect. Has anything changed since then, and where are we up to now?

Richard Webb:
Well, Tahn, it's been a few months since the legislation was made in parliament and got Royal Ascent. So it's actually been a fair hive of activity, both in the sector, but also at the ATO as well. So to give you an example of that, the ATO has released some detailed guidance as to how it is that employers can comply with the new rules. There have been new checklists released.

There are currently an enormous testing regime going on regarding some of the changes to Superstream as well, but also in addition to that, regulations have been made outlining how the qualifying earnings will be calculated for the purposes of payday super as well. In addition, the ATO has published a first-year compliance approach. And of course, in that particular case, employers who are doing their best to comply will be treated as low risk by the ATO and probably not deemed much in the way of follow-up information unless something's reported to them.

With respect to everyone in the sector, of course, payroll providers are building and testing and rolling changes into live systems. So you can see that there's a lot of work being done there, but it is important to outline that the key messages from the legislation and the policy itself have not changed. As you know, of course, super must be received by funds within seven days of payday, and you will probably hear payday referred to a little bit as qualifying earnings day or QE day.

It's the same thing, but it does mean that employers need to make sure that they're getting their superannuation contributions in within seven working days. And therefore, probably if they haven't started now, employers should be planning to make sure that that happens from the 1st of July.

Tahn Sharpe:
Okay. And just to clarify, this isn't just about paying super more often, is it? There's more to it than that. What does payday super actually mean in practice?

Richard Webb:
Well, that's right, Tahn. It certainly isn't necessarily paying super more often because, of course, there are a lot of employers here who actually do send super off now in line with payday themselves. It's just really taking away the fact that the key driver of compliance as it currently is is that it's a quarterly obligation, whereas from the 1st of July, it will be part of every payroll run. And by part of every payroll run, of course, the golden rule is that you'll get your contributions in within seven working days of that payroll run.

So I guess for employers who are currently making those super contributions quarterly as they might be now, they will need to switch to get them in line with the interval that they actually pay their employees in, whether it be monthly, fortnightly, weekly, et cetera.

But essentially what conceptually we're trying to do is to make sure that deferred pay in the form of super lines up with immediate pay and makes a little bit more sense, I guess, to the employees by being able to spot the fact that their super is being contributed to pretty much at the same time, well, within a few days anyway, of when they're paid. So what it means, I guess, is that employers do need to get this right every payday.

They need to make sure that the superannuation guarantee is calculated correctly every payday, and they also need to know that the clearing houses that they deal with are going to move the money fast and that they're going to have the correct data to make sure that the contribution goes in to the right account at the right fund within seven working days. And that's essentially the key messages.

Tahn Sharpe:
All right. Now we're looking at a 1 July start date, and given that immediacy, I guess the big question becomes, is everyone ready? So I guess from a practical sense, Richard, what do you think businesses should be doing between now and July 1?

Richard Webb:
There's a few things that they could be doing. I think the first thing to be aware of is the fact that every employer is going to have different arrangements in how they go about doing their payroll and how they go about making their superannuation contributions. So in the first instance, of course, it's the payroll system that the employers need to know front to back to make sure that they are able to say, well, given this information that goes in, what's going to come out in the form of how we go and pay our employees super obligations?

So speak to your payroll provider now, get confirmation that your system is payday super ready. Make sure, of course, that you've possibly had a chance to test it and make sure it's going to work on the 1st of July. In some instances, some employers are moving to try and make sure that they're able to comply earlier than the 1st of July, which is probably a really good idea because it gives them a little bit of wriggle room if something does go wrong between now and then.

And of course, if they need support in the interim, chatting to their payroll provider now means that they'll be aware of what they need to do should something go wrong on the day. But in addition to that, of course, there is the issue that we outlined in our previous discussion about cash flow and payroll modelling. So because super is going to be an immediate shock to the cash flow on every payday, I guess compared to what it is now, it can't be considered a quarterly buffer anymore.

Employers need to make sure that they're able to get the contributions out on the day that people are paid, and they also need to make sure that come the 1st of July, of course, if they're still making contributions from the previous quarter of the current financial year, they've got the cash flow there to cover as well.

So they certainly need to be on top of that too. The third thing I think that's important is in respect of employee super fund data. If you're in a position where you've got some issues that are currently happening from some of your data and it's not correct, you've pretty much got until the end of June to get that cleaned up. If you have incorrect fund details, it does mean failed payments.

You will only have seven days to get contributions in from the 1st of July. So if the fund details are incorrect, that eats into the time that you have available to comply as well. So there's very little time to fix errors. This, of course, is going to be something that you run into all the time with your business, whether you've got existing employees who are changing their super funds or new starters who come into the business with new fund details as well.

And one of the things that is being tested now for implementation on the day is a message type for your payroll system through the Superstream system, which will allow you to actually confirm that the fund data that you have is correct with the fund details that they've provided to you. And then finally, I think it's important just to reiterate that clearinghouse arrangements are necessarily going to change for businesses that have been using the small business superannuation clearinghouse.

That does close on the 30th of June, and businesses who are currently using it won't be able to use it anymore. You will need to arrange an alternative arrangement if you haven't done so already. And our advice to you is to go and see your payroll provider in the first instances, as you might find that they have a solution that's able to help you out.

Tahn Sharpe:
Okay. So a lot of things that can be done now leading up to 1 July. And one of the other link changes is that employers are going to need to switch to calculating qualifying earnings from ordinary time earnings. What's the key risk for employers?

Richard Webb:
Oh, the key risk, Tahn, is complacency. I think there's a message going around that there's not a great deal of difference between qualifying earnings and ordinary time earnings, which is the basis now. And it is true that OTE concepts will mostly go unchanged, but certainly, of course, businesses should be getting advice now on how this is going to affect them. Qualifying earnings is, of course, the new calculation base.

It does include OTE, but it also does include taking into account salary sacrificed super and certain other components as well to give the correct figure that should be used for calculating the superannuation guarantee. There are no major changes to OTE itself. For example, overtime will remain excluded, and certainly for most employers outcomes may look similar, but there might be definitional matters that change with respect to variable pay, allowances and packaging arrangements.

Getting it wrong does mean underpayments. And of course, the ATO has said in some of their public statements that because this is a new concept, getting it wrong won't be an excuse. So if you haven't actually sought advice on whether this will change things for your business from the 1st of July, it's best to go and get that organised now.

Tahn Sharpe:
Let's maybe talk about the ATO's tolerance for mistakes, or you might say non-compliance. How forgiving do you think the ATO will be in the first year?

Richard Webb:
Oh, look, it's important to reiterate that the ATO have taken what we think is a pragmatic approach, but it doesn't mean that it's free from penalties. You still have an obligation on your business to make sure that contributions are made within seven working days. And of course, it does mean that your business will need to make an effort to comply, and also the systems that you use to get the contributions from your business to the super funds does matter.

So late super still has real consequences, and that's important. It has consequences for you as a business, but it also has consequences for your employees too. So the ATO, of course, has published practical compliance guidance, which flags a pragmatic approach. And of course, in that, they've indicated that their focus will be on employers who simply either don't engage at all or just repeatedly miss deadlines to get them in.

They've quite specifically stated that in the case of low-risk employers who make genuine efforts and have their systems in place and fix issues quickly, they're not going to dedicate additional compliance resources to that. What that really means is that if you're a low-risk business and you still manage to get a contribution in late, expect to have a superannuation guarantee charge of a small amount, but remember, you can actually make efforts to reduce that.

Late super still triggers the SGC, but employers should be in a position to understand their dollar obligations and their end-to-end contributions pipeline in order to comply. But efforts, systems and documentation all matter. Your payroll provider should be able to provide you with guidance as to how to fix this up. The ATO has information lines in place to make sure that you're able to comply as well. And if you think you're going to be late with a particular contribution as well, you can reduce your penalties markedly by making sure you get your voluntary disclosure statement in.

Tahn Sharpe:
Okay, great. Some really important information there for employers and payroll employees. Before we finish, another major change starts from 1 July, and that is division 296, which is the big tax hike for individual super balances over a certain amount. What should our members be thinking about now if they're affected?

Richard Webb:
Tahn, it's a great question. I think one of the things that we're saying to everyone who has been asking about this is that early advice is critical. Certainly, of course, we think that most people, of course, won't be affected. I don't think I'm ever going to have to worry about this myself, but certainly those who think that they're going to be affected probably need to act now.

And in particular, those of you with self-managed super funds may have some unique issues of their own going into the new financial year. So I'll briefly touch upon some of those. I mean, I guess the key thing to note, and I can't reiterate this enough, is that if you think you might be in scope, get financial advice now. It's possible that you might not necessarily be in scope in this financial year, but you might be in scope for a future financial year.

Again, recommend you get advice now. Those of you who are likely to be in scope either now or in the new financial year, planning is critical and it could mean the difference between small amounts of division 296 tax or large amounts of division 296 tax. For SMSF trustees, there is an optional CGT cost-based reset on the 30th of June 2026, and this is a one-off decision. It's a decision that trustees can't make for some of their assets.

They either have to make it for all or none of the assets. And if trustees are looking to make a decision in relation to that optional cost-based reset, it's possible they might need to actually look into valuations now. That has some issues, I suppose, of an ongoing basis, in particular, the fact that SMSFs usually need valuations done, but quite often they'll get valuations done after the end of a financial year.

If you're looking into the likelihood of whether or not you need to claim this one-off cost-based reset, you may actually need to book your valuer now in order to do that. And because of the end-of-year capacity constraints due to ordinary valuations taking place, you might find that you actually need to book them earlier rather than later. But in addition, some individuals might find that they have new obligations anyway.

Those of you in SMSFs who are just purely in the accumulation phase might find that you need to book an actuary for the first time, even though none of the fund is subject to pension income at the moment. So your accountant should be able to help you out to identify if an actuary is required and also help you with selecting an appropriate actuary to do the necessary work there as well. So look, just to close that off, Tahn, don't wait for assessments and get early advice as soon as you can because it could make a material difference.

Tahn Sharpe:
Very good. Well, thank you for your time, Richard, and for breaking down what clearly is looking like a very busy few months ahead.

Richard Webb:
Thank you, Tahn. And once again, pleasure for having me on.

Tahn Sharpe:
Wonderful. Thanks. For listeners wanting more information, we'll include links in the show notes to CPA Australia Resources and the ATO's payday super guidance. And don't forget to subscribe to With Interest and share this episode with friends and colleagues in the business community. Until next time, thanks for joining us.

Garreth Hanley:
To find out more about our other podcasts and CPA Australia, check the show notes for this episode, and we hope you can join us again for another episode of With Interest.