Payday super is now in effect
1. Employers should now be aware of the Federal Government’s ‘Payday Super’ reforms, which commenced from 1 July 2026.
2. These changes were introduced in November 2025 by the Federal Government, amending the Superannuation Guarantee Charge Act 1992 and the Superannuation Guarantee (Administration) Act 1992 (SGAA).
3. For employers, the most important change is the removal of quarterly superannuation guarantee payments. Now, in most circumstances, employers must make superannuation contributions on behalf of their employees at the same time as they pay salary and wages.
4. If these payments are not received by the employee’s superannuation fund within seven days, or are not made at all, the employer may be liable to pay superannuation guarantee charge (SGC).
5. An SGC liability will be assessed by the Australian Taxation Office (ATO) on an employee’s ‘qualifying earnings’, a concept introduced by the November 2025 reforms, replacing the former ordinary time earnings basis for calculating superannuation obligations.
6. The SGC also includes an interest component, calculated by reference to the ATO general interest charge (GIC) rate on a daily compounding basis, together with an administrative uplift that may vary depending on the employer’s compliance history. The administrative uplift may be reduced where the employer makes a voluntary disclosure, and the SGC is generally tax deductible under the new regime.
Risks for businesses engaging contracts
7. If your business engages contractors, you may think that Payday Super (and superannuation, generally) does not apply to the contractors. However, this may not be the case. Section 12 of the SGAA operates to expand the definition of ‘employee’, for superannuation purposes, to include individuals engaged under a contract that is ‘wholly or principally for their labour’.
8. Accordingly, where contractors have been engaged, it is important to ensure that the contractor arrangement does not fall within the scope of s 12(3) of the SGAA. If it does, the contractor is treated as an employee for SG purposes and, as a result, the business is required to make superannuation contributions on behalf of the contractor.
9. The ATO regularly reviews contractor arrangements. In the recent Administrative Review Tribunal decision in Balmain Dental Clinic Pty Ltd v Commissioner of Taxation [2026] ARTA 895 (Balmain), a dental practice was held to be liable for approximately $70,000 in unpaid superannuation. In Balmain, the terms of a contractor oral therapist’s contract with the dental clinic were deemed to constitute a contract ‘wholly or principally for the labour’ of the oral therapist. Relevantly, under the contract, the oral therapist:
(a) lacked genuine business autonomy or a right of delegation; and
(b) worked under significant control by the clinic.
What can I do?
10. The Payday Super reforms impose tighter compliance obligations and expanded penalties. This means that there are more ways that your business can be inadvertently tripped up when engaging contractors.
11. It is a good opportunity to review all contractor agreements from a superannuation perspective and, where needed, update agreements or assess potential risks.
12. If you would like assistance reviewing your contracts or assessing your obligations under the new regime, please contact our team.
