Employment Tax

Australia | Government introduces draft legislation affecting superannuation guarantee obligations

Summary

The Australian Government has introduced draft legislation (Treasury Laws Amendment Bill 2025) targeting unpaid superannuation guarantee (SG) obligations. This draft legislation introduces significant revisions to the broader SG framework, most notably accelerating the timeline for SG contributions. Employers will be required to ensure that superannuation funds receive SG contributions within seven calendar days of salary or wages payment, replacing the current quarterly payment schedule. These changes are planned to take effect from 1 July 2026.

While the reforms seek to streamline SG compliance, they present significant challenges for multinational companies, particularly those with globally mobile employees and foreign payroll arrangements. At this stage, no specific concessions have been made for these types of employees.

This alert outlines the key changes and offers insights into compliance strategies.

The detail

The draft legislation introduces significant updates to the calculation and payment of SG obligations. These measures aim to incentivise employers to make timely SG contributions, with opportunities for reduced penalties and interest for voluntary disclosures made within a reasonable timeframe.

Calculation of SG

• Introduction of qualifying earnings (QE): QE will serve as the basis for calculating SG contributions and includes ordinary time earnings (OTE), salary sacrifice contributions and other amounts currently covered under the SG legislation.
• Annual application of maximum contributions base: the maximum contributions base will now be applied annually, based on the concessional contributions cap. Currently it is calculated on a quarterly basis. Where QE exceeds the maximum contributions base during the year, any subsequent payment of QE is treated as nil.

Shift to payday SG obligations

• More frequent payments: The legislation mandates that SG contributions be calculated and remitted with each pay, rather than quarterly.
• Payment timing: The contributions are deemed to be paid when they arrive in the employee’s super fund. This must happen within seven calendar days of payment of QE. Within these seven days, the superannuation fund will have three days to allocate or return payments that are unable to be allocated.
• Exceptions and extensions:
  • new employees – additional 14 days
  • contributions to a stapled fund which is rejected – additional 42 days
  • out-of-cycle pays – can be settled with the next regular pay

At this stage, no specific extensions have been announced for employees paid from foreign payrolls. This is at odds with the current STP reporting approach for such employees, where STP reporting may occur by the end of the following month. Vialto Partners will flag this discrepancy for review during the consultation period.

Updated SG charge

• Base SG Shortfall: Employers must calculate SG owed for each employee on each QE day, with shortfalls determined using QE instead of the broader base applied previously.
• Interest and Penalty Adjustments:
  • The SG charge (SGC) interest component will be calculated daily at the general interest charge rate.
  • Administrative penalties will increase significantly from $20 per employee per quarter to 60% of the SG shortfall, reducible on a sliding scale if a voluntary disclosure is made within 120 days of the QE day.
  • Employers with a compliant history over the prior two years (from 1 July 2026) will qualify for a further 20% reduction.
• Additional penalties: The Australian Tax Office (ATO) can make an assessment of the SG shortfall using data available through Single Touch Payroll and superannuation fund reporting. Penalties apply if the assessed SGC is unpaid within 28 days of the notice of assessment.
• Choice loading penalty: Increased penalties will be imposed for failing to meet choice of fund requirements.
• Tax deductibility: SGC amounts will now be tax-deductible to the employer (previously, a deduction was not available). A deduction for penalties and interest imposed after assessment of the SGC will remain non-deductible.
• Administration: Lodging an SG statement is no longer mandatory – a voluntary disclosure statement (in the approved form) will replace this.

Australian Tax Office activities

• STP updates: Both the OTE and superannuation liability for each employee will need to be reported through STP, to assist with the identification of the SG liability.
• Enhanced detection and recovery tools: The ATO will gain increased capabilities to identify and recover unpaid SG, with stricter penalties for non-compliance.
• Decommissioning of SBSCH: The ATO’s Small Business Superannuation Clearing House (SBSCH) will be decommissioned from 1 July 2026, requiring employers who currently rely on this service to transition to commercial or super fund clearing houses.

Onboarding

• The draft legislation includes measures to ban advertising certain financial products to employees during onboarding, specifically during fund selection. Importantly, employers remain exempt from offering fund choice to temporary residents of Australia, who may instead be enrolled in the default fund.

What this means for employers

The requirement for superannuation funds to receive contributions within seven days of salary and wage payments introduces a tight compliance deadline. Coupled with the ATO’s ability to swiftly detect underpayments and the revised SGC framework, these changes necessitate careful preparation and implementation of robust processes. To ensure compliance, employers of globally mobile employees should consider the following actions:

• Review the workforce – identify the population of employees working in Australia
• Rapidly assess SG applicability – promptly determine which employees are subject to SG
• Audit payroll systems – verify that payroll configurations support accurate STP reporting and correct SG calculations
• Evaluate clearing house processes – assess the administration provided by the employer’s superannuation clearing house, including procedures for managing rejected contributions

How we can help

Our team of global mobility and tax professionals can assist you in navigating these changes and ensuring compliance with Australian superannuation laws. Contact us today for a consultation.

Contact us

For a deeper discussion on the above, please reach out to your Vialto Partners point of contact, or alternatively:

Emma Wappet
Partner

Kristy Whitnell
Director

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