Payday super to raise costs for small business, COSBOA warns

The government’s plan to make super and wages payable simultaneously may increase payroll software and transaction costs and also raises a number of concerns about process and efficiency, COSBOA has said.

The government announced last week from 1 July 2026 employers will be required to pay their employees’ superannuation at the same time as their salary and wages.

Treasurer Jim Chalmers said the change was simple and would strengthen the superannuation system.

“By switching to payday super, a 25-year-old median income earner currently receiving their super quarterly and wages fortnightly could be around $6,000, or 1.5 per cent, better off at retirement,” the Treasurer said.

“The change will particularly benefit those in lower paid, casual and insecure work who are more likely to miss out when super is paid less frequently. Women are overrepresented in this group.”

COSBOA stated the current proposal doesn’t consider the complexities of making super payments and won’t resolve existing problems.

Payday super would raise processing costs for all parties involved, it said.

“Employers will be paying more for their payroll software and subject to the super gateway utilised also paying more for each transaction,” it stated.

COSBOA also has concerns the measure will complicate payroll corrections.

“Payments can change with public holidays, allowances, loadings, and deductions, or when overtime is reported after a pay run is complete. If super is to be paid on payday, questions arise about handling corrections and overpayments,” it said.

“What happens when an employees pay is corrected and super has been overpaid? What happens when the difference in super is $0.50 and a correction incurs transaction fees in excess of the corrected amount?”

There are also concerns the government provided Small Business Superannuation Clearing house (SBSCH) is ill-equipped to handle payday super.

“It cannot process multiple payments in quick succession and has a history of delays, with reports of payments through the SBSCH taking months to be received by super funds. A significant overhaul is needed to accommodate the proposed more frequent super payments,” said COSBOA.

The proposal to move employers to compulsory payment of super on payday requires careful and considered design, the advocacy group said.

“It must allow a corrections framework whereby errors can be found, fixed and any shortfall paid once per quarter (aligned with BAS reconciliation and verification processes),” it stated.

“This proposal requires consideration of the cost to business, balanced with the benefit to the employees superannuation growth.”

The IFPA’s head of superannuation Natasha Panagis acknowledged it could cause cash flow problems for smaller businesses, which would need to find ways to pay super more frequently.

However, she said it was a big win for workers.

“The change will allow more workers to be better off in retirement due to the power of compounding interest,” she said.

“Having superannuation guarantee contributions paid at the same time as salary/wages and therefore more frequently than the current quarterly SG regime will allow many Australians to grow their retirement savings faster and be better off in retirement.”

The SMSF Association agreed the move to payday super will ensure greater SG compliance and ultimately will result in individuals enjoying higher balances in retirement.

“In addition to benefiting those in lower paid, casual, and insecure work who are more likely to miss out when super is paid less frequently, it will also provide added certainty in terms of the timing of contributions which, from an advice and contribution planning perspective, can be critically important and may help to reduce instances of inadvertent cap breaches,” said SMSF Association chief executive Peter Burgess.

“It will also provide greater levels of transparency and hopefully engagement as employees will find it easier to track their SG contributions by linking it to their wage payments.”

Australian Institute of Superannuation Trustees CEO Eva Scheerlinck said the measure was overdue and the burden on business was overstated.

“We know the majority of employers do the right thing but some do not and, given superannuation is deferred wages, it makes sense that it be paid at the same time as salary and wages,” Ms Scheerlinck said.

“Historically, there has been an argument that paying more frequently than quarterly would be a burden on employers.

“However, since the introduction of digital initiatives such as SuperStream and Single Touch Payroll, paying super is part of an automated process, requiring no additional manual effort.”

Super Australia chief executive Bernie Dean commended the government for doing “the right thing” by workers.

“This is a big win for the three million mostly young and lower paid Australians unfairly deprived the super they’ve earned,” he said. “The government should be commended for listening and then taking the necessary steps to end the huge super rip off which was undermining the future economic security of too many young women and others on lower incomes.”

Mr Chalmers said the move would help employees spot unpaid entitlements and the ATO would get additional funding to police the system more effectively.

“Payday super will also make it easier for employees to keep track of their payments, and harder for them to be exploited by disreputable employers,” he said.

The government would set tighter targets for payment recovery after the ATO estimated $3.4 billion worth of super went unpaid in 2019–20.