Payday Super (PDS) starts now (1 July 2026)
Employers must shift from quarterly super payments to real-time compliance, paying super contributions much more frequently.
Core compliance requirements: Employers must:
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- Pay super on time
- Accurately calculate earnings
- Verify fund details
- Act quickly on errors or missed payments
Directors remain personally liable for unpaid super.
Payment deadlines:
Super must generally be paid within 7 days of the qualifying earnings (QE) day, with limited exceptions (up to 20 days in special cases).
Penalties for non-compliance:
Late or missed payments can trigger the Superannuation Guarantee Charge (SGC), which includes unpaid super, interest, and admin fees.
Even payments made late still incur notional interest (not tax deductible).
Late payment handling changes:
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- The ATO is targeting higher-risk employers, especially those not adapting to frequent payments or failing to pay super at all.
- The late payment offset is abolished
- Employers should still pay late contributions to reduce the shortfall
- A new Voluntary Disclosure Statement (VDS) can be lodged to report issues and potentially reduce penalties (up to 40%)
Cash flow pressure:
Employers may feel strain due to more frequent payments alongside existing obligations. Changing payroll cycles is possible but limited by employment agreements.
Operational risks:
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- Incorrect or outdated employee fund details can cause payment rejections
- Issues like SMSFs with compliance restrictions can lead to missed deadlines
What changed in Xero for PayDay Super:
Xero added improvements like:
- Employee self-onboarding for super choice
- Fund verification (via ATO member verification requests – coming/ongoing rollout)
- Validation of USI + member numbers
Super is no longer based on OTE only → now based on Qualifying Earnings. Xero added a checkbox on pay items to mark them as QE. You need to make sure the earnings, allowances, salary sacrifice items classified correctly or super will be wrong.
STP reporting now includes new categories which include Qualifying earnings and super amount per payrun.
Steps to process payroll from 1 July 2026:
After each pay run → you process super immediately (often same-day via Auto super)
- Run payroll
- File STP
- Click“Pay Super” / Auto Super immediately
What Xero users need to do
Before/after 1 July 2026, you should:
- Enable Auto Super
- Check all pay item QE settings
- Verify employee super details
- Update your pay run checklist (pay super every time)
- Reconcile super accounts more frequently
- For cash flow management, consider reducing the frequency of pay runs to limit how often super payments need to be processed. However, any changes must be discussed with, and agreed upon by, your employee
