What is Payday Super?
With the implementation of Payday Super, businesses in Australia must adjust their payroll processes to comply with updated superannuation laws. This reform changes how and when employers make super contributions, with significant implications for cash flow, compliance, and overall business operations. By 2026, the new system will be fully implemented across Australia, impacting how superannuation is reported and managed for employers. Here’s what you need to know.
Impacts on Your Business
Increased Compliance Requirements
- Employers must ensure their payroll systems can handle real-time superannuation payments.
- The Australian Taxation Office (ATO) will have greater visibility of non-compliance, making timely and accurate contributions crucial.
Cash Flow Adjustments
- Businesses need to manage cash flow more efficiently since super contributions will no longer be deferred quarterly.
- This change can particularly impact small businesses with limited cash reserves.
Administrative Workload
- Payroll processes must be updated to align with Payday Super requirements.
- This may involve upgrading payroll software or working with payroll providers to automate superannuation calculations and payments.
Penalties for Non-Compliance
- Failure to comply with Payday Super requirements could lead to penalties, including interest charges and fines from the ATO.
Implications for Higher Income Earners
- If an employee income exceeds $250,000 annually, contributions may attract additional tax (Division 293 tax). With real-time reporting, it’s critical to monitor contributions to avoid penalties or surprises during tax time.
Preparing Your Business for Pay Day Super
To ensure a smooth transition to Payday Super, you should take the following steps:
- Upgrade Payroll Systems
Invest in modern payroll software that automates superannuation calculations and payments. Many systems now integrate real-time reporting to help businesses stay compliant.
- Monitor Cash Flow
Review your financial processes to ensure super contributions can be made on time without impacting other operational expenses.
- Stay Updated on the New Rates
The superannuation rate will increase to 12% by 1 July 2025; employers will need to contribute a higher percentage of employee wages to super. Potential tax implications if total contributions exceed the $30,000 cap up from $27,500 in the last financial year for concessional contributions.
- Educate Your Team
Train payroll and HR teams on the new requirements to minimise errors and ensure compliance.
More details can be found on the Australian Tax Office (ATO) website.
To Wrap Up
- Payday Super improves the timeliness and accuracy of super contributions, streamlining employees’ tax return process.
- Track super contributions throughout the year to ensure they align with ATO obligations.
- Be mindful of changes to the superannuation rate 2025 and its impact.
By staying informed and proactive, you can make the most of these superannuation changes while avoiding any tax-related issues to your business.
How Does Workstem Help?
Simplify your payroll process and ensure accurate payday super rates with Workstem’s automated payroll system. Our pre-built modern award interpretation software covers 122+ awards and 34 EBAs, and keeps you up-to-date with penalty rates and other award entitlements.
Choose between our Standard and Advanced plans, and enjoy a range of benefits such as Fair Work compliance, an employee self-service App, and custom rule set. We have integrated our system with Microsoft and Netsuite as well to bring you a complete HR SaaS solution for your business.
Book a free demo with our payroll experts. Experience the efficiency and accuracy of Workstem today!
Read More:
Casual Employment and Superannuation: What You Need to Know
