IFPA calls for refinements to payday super legislation to ease small business burden

The government's draft payday super legislation has been broadly welcomed by the business and super community, but further modifications are required to ensure its implementation goes smoothly.

In a submission to Treasury, the Institute of Financial Professionals Australia (IFPA) urged the government to implement several practical refinements to the legislation to ease the compliance burden on small businesses and improve the system’s fairness and functionality.

“While we support the proposed change requiring employers to pay superannuation guarantee (SG) contributions at the same time as salary and wages, we believe amendments are needed to ensure its effective implementation,” IFPA said.

“Payday super is a win for employees, but to make it work in the real world, we need a system that’s modern, efficient, and fair – especially for small businesses.”

In its submission, IFPA outlined several key recommendations to improve the payday super regime including, the exemption of micro businesses, adopting a ‘pay date’ model, regulating superannuation clearing houses, introducing a standardised extended due date, retaining the SG statement option and applying flexibility for SMSFs.

The professional body recommended that small businesses with 10 or fewer employees be exempt from the regime and be allowed to continue making quarterly superannuation guarantee (SG) contributions, as the proposed payday super model would be too complex for them to adopt.

Alternatively, the IFPA suggested micro businesses could be transitioned to a monthly SG payment cycle or given a longer implementation period.

Natasha Panagis, head of technical services at the IFPA, said small employers would face the biggest hurdles under the new system.

“A phased rollout and realistic timelines will give them a fair chance to succeed. And for employees with SMSFs, we need more flexibility – one late lodgement shouldn’t jeopardise their super,” Panagis said.

“To truly deliver on the promise of payday super, the underlying systems must be brought up to speed. That means upgrading superannuation clearing houses, payment platforms, and payroll systems to handle more frequent contributions in real time. Without these improvements, we risk setting employers up to fail.”

IFPA suggested for the regime to shift from the proposed ‘due-date’ model to a pay-date’ model for SG contributions, with a 14-business day window to allow compliance and reduced penalties due to delays caused by banks, clearing houses or fund processing times.

Along with all recommendations made, another key area along with small businesses that IFPA highlighted was the impact on SMSF members and compliance with ATO standards.

In the submission IFPA said: “We would like to highlight the challenges faced by employees who nominate a SMSF as their choice of fund, particularly when the SMSF has lodged its annual return late. Under the current ATO administration, this situation is handled quite rigidly, and we believe more flexibility is warranted.”

This was attributed to a failed SMSF lodgment, which often led to the fund being removed from the super fund lookup register, which could then create significant issues for employees, and therefore would be reasonable for a fund to continue receiving SG contributions in genuine, one-off cases of late lodgment.

The IFPA said the successful implementation of payday super would rely on significant improvements across several systems to accommodate more frequent SG contributions.

“In conclusion, for payday super to achieve its intended benefits, supporting systems must be modernised to operate in real-time,” the institute said.

“Superannuation clearing houses, payment platforms, and payroll systems must all be upgraded to handle the increased frequency of contributions and ensure seamless processing. Without these updates, employers may face compliance risks and administrative challenges, undermining the reform's effectiveness. A coordinated, technology-driven approach is vital for the successful rollout of payday super.”

The Super Members Council (SMC) also voiced support for the draft payday super legislation in its own submission to Treasury.

According to the council, unpaid superannuation affected one-in-four workers across Australia, and in 2021–22, $5.1 billion of super went unpaid for 2.8 million Australians, with an average underpayment of $1,800 per worker.

“As a strong voice advocating for more than 11 million everyday Australians with retirement savings in profit-to-member super, the SMC backs the clear commitment in this legislation to tackle the scourge of unpaid super,” SMC said.

“We urge all parties and parliamentarians to give a clear commitment to pass payday super legislation swiftly when the new Parliament sits. By the time these laws start on 1 July 2026, Australian workers will have waited three years for the reforms.”

Similar to the IFPA, SMC recommended several key amendments to the legislation to enable a smooth transition with “strong buy-in from employers”.

SMC outlined nine recommendations in its submission, the main ones including amending the seven-calendar day deadline to seven business days for super payments to land in a worker's account, and the Tax Office clearly articulating transition arrangements and prioritising uplifts to its stapling service and assisting employers to transition from the small business clearing house to other payment providers.

The council said it urged that these be the main recommendations considered from the submission, based on the incorporated feedback from across the profit-to-member super sector.

“These payday super laws will be a game changer to ensure Australians are paid the super they are rightfully owed – on time and in full – and enable businesses to compete on a level playing field,” SMC said.

“When super goes unpaid, it makes working Australians poorer in retirement, denying them crucial income to pay the bills after a lifetime of hard work.”