Payday Super changes from 1 July 2026 – superannuation guarantee charge

In November 2025, the Federal Government (Government) passed long-awaited legislation, known as “Payday Super”.

On 6 November 2025, Treasury Laws Amendment (Payday Superannuation) Act 2025 (Cth) (Act No 57 of 2025) (Act) received royal asset from the Commonwealth Parliament (Parliament).

Payday Super involves changes to the superannuation payment timing rules whereby from 1 July 2026, superannuation contributions are to be paid by employers within seven business days of each payday – replacing the current quarterly payment model. Refer to our previous publication for more information.

Under the Payday Super measures, other important changes were made to the superannuation guarantee charge (SGC) system.

This publication addresses the Payday Super changes related to the SGC system.

Background

To understand the current SGC reforms, it’s important to first consider the nature of late or non-payment of superannuation in the Australian economy.

As reported by the Australian Taxation Office (ATO), and in the year ended 30 June 2024¹ , the incidence of late or non-payment of superannuation is as follows:²

• There are approximately 902,000 employers who employ some 14.5 million workers who are eligible for superannuation;
• Employers paid 92.4% of the superannuation guarantee (SG) without ATO intervention;
• Therefore, 7.6% of SG (or more than 68,000 employers) do not pay SG without ATO intervention.

Furthermore:³

• A total of A$1.91 billion in SGC liabilities was raised through ATO compliance, taxpayer payment reminders and employer voluntary disclosures of unpaid SG, for over 1.13 million employees.
• At 30 June 2024, the total SG debt on hand was approximately A$3.7 billion, of which:

– A$2.2 billion of this amount is assessed as being collectable debt owed by approximately 89,300 employers.

– A$80 million is disputed debt; and

– A$1.4 billion is insolvent debt.

• In 2023–24, the ATO issued 8,714 director penalty notices to individual directors of 6,493 companies, for an original imposed value of $572.7 million in unpaid super guarantee.

– Of these, A$76.1 million in SGC director penalty notice liabilities have been collected, and A$483.6 million in unpaid liabilities remain outstanding;

– The ATO continue to pursue the directors for these unpaid amounts, using the available recovery options, including Court tax debt recovery.

• The ATO describe the “super guarantee gap” of 6.3% or A$5.16 billion as the difference between the amount of SG paid that employers are required to make for their employees and the actual contributions made.

Given these above observations, Payday Super seeks to improve the incidence of late superannuation payments in the Australia economy and thereby better securing the retirement outcomes for working Australians.

Superannuation guarantee charge – modified rules from 1 July 2026

From 1 July 2026, the proposed amended SGC system requires consideration of the following:

• In 2026-27, the rate is proposed to be 12%.⁴
• An employer’s superannuation contributions will have to be paid within seven days of payday and whether weekly, fortnightly or monthly;
• Exceptions to the seven-day payday rule may apply, including in relation to new employees, or out of cycle payments (e.g. commissions or bonuses).⁵

Individual final SG shortfall

If employers provide less than the required minimum level of superannuation or the superannuation obligation is not paid by payday (i.e. seven days from payday whether weekly, fortnightly or monthly), the employer will be liable to pay the SGC.

From 1 July 2026, the new components of SGC are:

• the total of an employer’s individual final SG shortfalls for the Qualified Earning day (QE day). Refer below definition of the QE day;
• the sum of all individual notional earnings components for the QE day;
• the total of the employer’s choice loadings for the QE day; and
• any administrative uplift amount for the QE day;

(section 16B of SGAA 1992).

The minimum level of superannuation obligation for an employee requires consideration of the following.

Minimum SG contribution

The minimum SG contribution an employer is required to make for an employee is the ‘individual superannuation guarantee’ amount and is calculated as follows, Qualified Earnings x charge percentage / 100 (refer section 17A of SGAA 1992). From July 2026, the charge percentage is 12%.

Qualified earnings (QE)

The minimum SG contribution obligation, requires consideration of the employees Qualified Earnings.
Qualified earnings are a new concept and include – Ordinary time earnings (OTE) and salary sacrifice superannuation contributions; and other amounts which are currently included in an employee’s salary or wages for SG. Each employer should review the new earnings base, in light of the current payroll system’s operation (refer new section 10A of SGAA 1992 and commentary in the above previous publication re Payday Super).

Qualified Earning day (QE day)

An employer’s ‘QE Day’ is the day on which an employer pays Qualified Earnings to a fund for an employee (refer new section 17A of SGAA 1992).

Each employer should review the new earnings base outlined above, taking into account the operation of their current payroll systems.

Notional earnings

Notional earnings will accrue on the unpaid SG to compensate the employee for the lost superannuation earnings. Such matters are consistent with the notional interest charge (currently 10%) that exists under the SGC system that applies prior to July 2026.

The notional earnings compensate employees for the lost earnings on late superannuation payments.

The individual notional earnings component for an employee is calculated by applying the General Interest Charge to the individual’s base SG shortfall (refer to new section 19A of SGAA 1992).

Maximum contributions base

The Maximum Contribution Base (MCB) is an existing concept that is used to set an upper limit on the minimum amount of SG contributions payable by an employer for an employee in order to avoid potential SG charge liability. Under the payday SG framework, the MCB will be applied as an annual limit, rather than as a quarterly limit.

Choice loading

A choice loading may also be payable if an employer makes a payment to an incorrect employee fund (section 20A of SGAA 1992). From 1 July 2026, the choice loading will be a separate component to the SG shortfall. The 25% loading will be calculated on the value of the contributions for any Qualified Earning day (QE day) where the employer has not complied with the choice of funds provisions.

Payment by Voluntary Disclosure Statement

Employers can reduce the amount of the SG charge by making late SG contributions and promptly submitting a Voluntary Disclosure Statement to the ATO.

For unpaid superannuation obligations in the period after 1 July 2026, the Voluntary Disclosure Statement will replace the SG statement under the SGC system (a SG statement relate to the period that applies prior to July 2026).

To prevent any adverse personal liability that may be imposed by the ATO on a director of a company for unpaid superannuation, a Voluntary Disclosure Statement should be lodged on time.

Other matters

Under the new SGC system, late contributions will be deductible for income tax purposes (refer repeal of section 26-95 of the Income Tax Assessment Act 1997 (Cth));

Consistent with the existing SGC system, the ATO can assess an employee’s SG shortfall and issue an assessment.

If a Voluntary Disclosure Statement remains un-lodged past the due date, the ATO may rely on Single Touch Payroll data and data matching protocols to issue an assessment to an employer to determine the amount of SG charge (refer ATO website publication QC 105849).

New administrative penalties apply for employers who do not pay the SG charge, including:

• The previous $20 per employee administrative component will be replaced with a variable administrative component.
• A variable administrative uplift will be 60% x the total individual final SG shortfalls for the QE day, plus the total of the employers’ national earnings and will be subject to some discretion and pursuant to regulations. At the date of this publication, Regulations regarding the variable uplift had been made.
• If the ATO issues assessments, the ATO may also issue penalties, which have also been modified in the period from July 2026.
• General Interest Charge on any unpaid SGC.

SGC – example of employers SG shortfall and SGC

In the Explanatory Memorandum of the Bill which introduced the Pay Day rules, Example 1.15 provides an example of the employer’s SG shortfall and SGC liability:

Example 1.15 – Calculation of the employer’s SG shortfall and charge

Juliet has 100 employees whom she each pays $1,000 of qualifying earnings. She makes a $120 on-time eligible contribution (i.e. a contribution in the “usual period”) for 70 of her employees for this QE day, totalling $8,400 (70 employees x $120 per employee).

She makes a further $120 contribution during the late period (i.e. a contribution after the usual period but before her SG shortfall has been assessed) for each of the remaining thirty employees, totalling $3,600 (30 employees x $120 per employee is paid late).

These late period contributions are received by the employees’ funds 25 days after the end of the usual period (i.e. seven business days after QE day).

Juliet is assessed for her SG shortfall 35 days after the usual period and must pay the resulting SG charge.

When Juliet first pays her employees $1,000 in qualifying earnings, the total of Juliet’s individual SG amounts equals: 100 employees x $120 = $12,000.

• If she made no SG contributions, the total of her individual base SG shortfalls would be equal to $12,000.
• However, as she has made some contributions, the total of her base individual SG shortfalls is then reduced by $8,400 for the on-time contributions she makes for 70 of her employees (70 employees x $120 per employee is paid on time);
• Because Juliet has outstanding individual base SG shortfalls totalling $3,600 (for the 30 employees she did not make on-time eligible contributions for) after the usual period, she will now be liable for the SG charge.

Juliet did eventually make full contributions for the remaining 30 employees during the late period. This reduces the individual final SG shortfall for each of these employees to nil. However, because these were late contributions, they accrue notional earnings.

Assuming a GIC rate of 10%, the notional earnings component for each of the remaining 30 employees is their individual base SG shortfall ($120 for every employee in this case) multiplied by 25 days of pro-rated GIC. This equals 82.46c of notional earnings for each employee, or $24.74 in total (i.e. 10% x $120 x {25 days late /365} per employee).

In addition to the notional earnings, Juliet’s SG shortfall may also include an administrative uplift amount of up to 60% of the total of her individual final SG shortfalls and total notional earnings components (regulations allow for employers to reduce the administrative uplift percentage depending on previous behaviour and if, and how quickly, the employer discloses to the ATO their late contributions).

Because Juliet has reduced her individual final shortfalls to nil, the 60% administrative uplift will only apply in relation to the $24.74 notional earnings for a potential maximum of $24.74 * 60% = $14.84.

Therefore, when Juliet’s SG shortfall for the QE day is assessed, she will have the following SG charge:

• Total individual final shortfalls = $0
• Sum of all individual notional earnings components = $24.74
• Administrative uplift amount of up to $24.74 * 60% = $14.84
• Maximum SG charge amount she may be liable for = $39.58

Alternative scenario – non-payment and assessment of SG charge

By comparison, if, in the above scenario Juliet does not make any late contributions for 30 of her employees before she is assessed by the ATO and for the SG charge 35 days after the on-time period, her total SG charge would look like the following:

• Total individual final shortfalls = $3,600
• Sum of all individual notional earnings components = $34.68 (10% x $120 x {35 / 365 days} x 30 employees)
• Administrative uplift amount of up to ($3,600 + $34.68) * 60% = $2,060.81
• Maximum SG charge amount she may be liable for = $5,695.49

In this alternate scenario, Juliet does not reduce the individual final SG shortfalls to nil (i.e. she makes no contributions for thirty of her employees before the ATO assesses her SG shortfall).

This results in an additional 10 days of notional earnings. That is, instead of notional earnings accruing for 25 days (up until the point that the late contributions are received by the employees’ funds), notional earnings accrue for the full 35 days until Juliet is assessed.

From July 2026, and importantly, directors of companies should be aware of the above changes to SGC and given the personal liabilities that may arise for superannuation liabilities that remain unpaid (refer to amendments to section 269-30(2) of the Taxation Administration Act 1953 (Cth)).

In summary, from July 2026, the SGC system remains complicated if an employer underpays superannuation or pays the SG entitlements of an employee late, after payday.

Next steps

While the above summary outlines some of the changes taking effect from July 2026, this publication should not be relied upon as a substitute for professional advice. We recommend discussing your specific circumstances with your trusted Nexia advisor, including your superannuation payment history, timing of contributions, and any potential additional notional earnings, interest or other penalties that may apply.

Contact your trusted Nexia advisor for more information or guidance on the new Payday Super measures – including how they may affect your existing payroll systems and the payment of superannuation guarantee contributions (SGC) from July 2026 and beyond.

¹At the date of this publication, updated ATO statistical was not available for the 2024-25.
²Refer 2024 ATO Annual Report and ATO website publications QC70892 and QC 103381, “Super guarantee annual employer compliance results” dated 19 November 2024
³Refer FN 1 and FN 2
⁴https://www.ato.gov.au/tax-rates-and-codes/key-superannuation-rates-and-thresholds/super-guarantee
⁵Refer section 18C(2) table item 4 of the SGA Act 1992