Super balance not a priority for young Aussies, SMC reports

Despite the long-term benefits of well-managed super, many aren’t motivated or don’t know where to start.

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New findings from research house Ideally reveal that more than a third of young Australians check their superannuation balance rarely, some only once a year. 

More than one in four can’t name their fund.

The survey, conducted by the Super Members Council (SMC), involved more than 1,300 Australians and found that lack of knowledge and the length of time until retirement were among the reasons.

Managing excessive super fees alone could make a significant difference to an individual's balance at retirement, with an SMC model having shown that simply paying 0.1 per cent more in fees could reduce super savings by $14,000, and paying 1 per cent more could make someone $128,000 worse off by retirement.

Some young Australians were disengaged from their super because retirement felt far away, with 33 per cent of young Australians having said that super didn’t yet feel like their money. In a recent episode of The Lawyers Weekly Show, Veronica Barbetta of UniSuper noted that younger professionals weren’t managing their super to its full potential.

She commented: “The earlier you engage with and think about your superannuation and make active choices, the better your outcome in retirement will be.”

Past research by SMC revealed that those with better super comprehension were six times more likely to take action to improve retirement savings. Currently, 46 per cent of young Australians are interested in being properly educated in super by their fund, according to the latest survey.

Super literacy was also not where it needed to be. SMC CEO Misha Schubert noted that more needed to be done to communicate how to make the most of super.

“Too many Australians risk sleepwalking into retirement with less money than they should have because they haven’t felt confident to engage with their super,” she said.

According to the SMC, one in four workers was not being paid all their super, costing 3.3 million Australians almost $6 billion a year. 

Other advice from the survey included consolidating super into one account, thereby avoiding multiple fees, as well as selecting a top-performing super fund and, if possible, making extra contributions. The SMC model showed that an average 30-year-old could have $67,000 more at retirement by sacrificing $20 a week.

Schubert added: “Small differences in super can add up to life-changing sums over time. That’s why staying engaged with your super from when you start working until you retire is so important.”

23 February 2026
Amelia McNamara
accountantsdaily.com.au

ATO crackdown on profit restructuring leading to higher tax bills: RSM

Recent ATO guidance on profit allocation will result in higher personal income tax bills for professionals restructuring their profits through trusts, RSM has said.

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RSM has raised the alarm about a little-known ATO practical compliance guide, PCG 2021/4, which has landed unsuspecting professionals with higher personal income tax bills.

The PCG, which was introduced in December 2021 and updated in June 2024, outlines the ATO’s compliance approach towards the allocation of professional service firm profits to individual practitioners, and how this is assessed for tax purposes.

The ATO released this guidance following concerns that professional service practitioners’ earnings were not being appropriately taxed as personal income.

Kristy Binns, RSM Australia corporate tax leader, said the PCG applied to professional services businesses that used structures such as trusts to distribute profits.

“Historically, professional firms enjoyed flexibility in using trusts and other structures to reduce tax, but that era is now over,” she said.

“The guideline requires that a fair share of profit, at least 50 per cent for a full equity partner, be reported as personal income.”

Binns noted that the ATO’s definition of “professional services” went beyond the usual suspects of doctors, lawyers and accountants, for the purposes of this guide. Instead, it applied to anyone who charged for expertise.

The PCG would result in higher personal tax bills for affected professionals, RSM noted. For example, a partner earning $1 million who previously took $200,000 personally and distributed the rest through a trust would have to report at least $500,000 as personal income.

Binns said the PCG would cause structuring and liquidity dilemmas for affected individuals, who would have to alter the way they engaged in tax planning.

“The ripple effects are significant. Mid-tier partners who once relied on trusts for negative-geared investments now face dilemmas,” Binns said.

“Some may sell assets or move them into personal names, which solves cash-flow issues but removes asset protection, increasing exposure if professional legal claims arise.”

For example, she recalled encountering an engineering firm partner that had previously only reported 30 per cent of their profits as personal income, and had to restructure to minimise ATO audit risk.

“We recently came across a partner in an engineering firm who was in the red zone, reporting only 30 per cent of profit personally.”

“They had to restructure to a 50 per cent personal and 50 per cent trust distribution. This reduced audit risk but increased personal tax by $70,000 annually.”

Binns encouraged professionals to ensure they were compliant with the updated PCG. While restructuring could lead to higher tax bills, she warned that ignoring the ATO’s guidance could lead to amended assessments and penalties later down the line.

“The best approach is to accept the new reality and work with trusted advisers to ensure compliance.”

“The immediate effect is higher personal tax, but ignoring the guideline could lead to even greater costs if the ATO challenges allocations.”

26 February 2026
Emma Partis
accountantsdaily.com.au

Will a shareholders agreement protect a business from a family law dispute?

When the personal intersects with the commercial – specifically, in the context of a family law dispute – shareholders agreements can be subjected to an unexpected level of scrutiny by Australian family law courts, writes Kristy-Lee Burns.

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It's a common misconception that a robust Shareholders Agreement will unilaterally dictate the treatment of a business interest in a property settlement. While these agreements are undoubtedly crucial commercial documents, the Family Law Act 1975 provides the courts with broad powers to achieve a “just and equitable” outcome, often looking beyond the strict letter of commercial contracts.

This can lead to surprising results for business owners who believed their interests were fully protected.

The Court's broad powers and discretion

The Family Court operates under the Family Law Act, which empowers it to make orders “altering the interests of the parties…in the property” and to do so where it is “just and equitable.” This broad discretion means that the Court is not strictly bound by commercial arrangements if upholding them would lead to an unfair outcome in a property settlement.

Consider the common scenario where a business interest is primarily held by one spouse, perhaps with a meticulously structured Shareholders Agreement in place. While the agreement might outline buy-out clauses or restrictions on share transfers, the Family Court will assess this asset as part of the total matrimonial pool, regardless of legal ownership. This assessment involves:

• Identifying and valuing the asset pool

The business interest, whether held individually, jointly, or through a corporate structure, must be disclosed and valued. This can involve complex valuation methodologies, particularly for private companies or those with unique assets like intellectual property or trailing commissions (as seen in mortgage broking or certain financial services businesses).

A business owner might perceive their business as worth millions due to its lifestyle-funding capacity, but a family law valuation, focusing on transferable value, may yield a significantly lower figure.

• Assessing contributions

The Court will then consider the contributions of both parties to the acquisition, conservation, and improvement of all assets, including the business. This goes beyond direct financial input. Non-financial contributions, such as homemaking, parenting, or supporting a spouse's career, are equally valued. If one spouse's efforts at home allowed the other to dedicate significant time and energy to building the business, this can be considered a contribution to its value.

• Considering future needs

Finally, the Court assesses the future needs of both parties, taking into account factors like age, health, income-earning capacity, and care of children. A disparity in future needs can lead to an adjustment in the division of assets, even if a Shareholders Agreement purports to define specific entitlements.

When commercial agreements come under scrutiny

Shareholders Agreements, partnership agreements, and buy-sell agreements are designed to govern the internal workings of a business and the relationships between its owners. However, in family law, their interpretation extends to how they impact the overall property settlement.

• Enforceability: While commercially binding, the Family Court has powers to set aside or vary agreements if they are deemed unfair or if there was a lack of full disclosure when they were made. This is particularly relevant if a Shareholders Agreement was entered into in anticipation of, or during, a relationship breakdown and could be seen as an attempt to defeat a family law claim.
   
• “Sham” arguments: In certain circumstances, the Court might look behind the corporate veil to determine if a company or trust is merely an “alter ego” of one or both parties, rather than a genuinely independent commercial entity. If the Shareholders Agreement effectively controls a structure deemed to be an alter ego, its terms might be less influential.
   
• Third-party involvement: Where a business has shareholders who are third parties (e.g., parents, other business partners), the Court may be reluctant to make orders that would unduly prejudice their interests. However, if those third parties are perceived to have acted in concert with a spouse to shield assets, the Court's powers may extend to binding them to orders, provided certain conditions are met under the Family Law Act. This could involve complex accrued jurisdiction arguments.
   
• Control vs legal ownership: A key area of scrutiny is the degree of actual control a party exercises over the business, irrespective of their formal shareholding. If a spouse is the effective decision-maker, director, or guiding force behind the business, the Court may attribute a higher interest to them than their strict shareholding suggests, potentially impacting how the business is valued or dealt with in the property pool.

Potential pitfalls for business owners

• Underestimating the Family Court's reach: Business owners often mistakenly believe their commercial agreements offer complete immunity from family law claims. The reality is that the Family Court views the entire financial landscape, not just isolated business structures.
   
• Poor timing of restructuring: Restructuring a business, altering shareholdings, or changing trust arrangements when a relationship is already “rocky” can be viewed as an attempt to defeat a family law claim. This can lead to adverse inferences and even court orders setting aside such transactions.
   
• Lack of full disclosure: Failing to provide complete and transparent financial disclosure regarding a business interest, including all relevant commercial documents like Shareholders Agreements, can lead to serious consequences, including cost orders or the setting aside of any agreement reached.
   
• Disregarding non-financial contributions: Overlooking the non-financial contributions of a spouse to the business's success or the family's well-being can lead to an unjust and inequitable assessment of the parties' respective entitlements.
   
• Inflated self-valuation: Business owners often have an emotional attachment to their ventures, leading to an overestimation of their market value in a family law context. A realistic, independent valuation from a family law expert accountant is critical.

Proactive strategies for business owners

• While no Shareholders Agreement can fully insulate a business from family law considerations, proactive steps can significantly mitigate risks:
   
• Early legal advice: Seek advice from a lawyer specialising in the intersection of family and commercial law at the earliest sign of relationship difficulties, long before separation. This allows for strategic planning within legal boundaries.
   
• Review and update agreements: Regularly review Shareholders Agreements to ensure they reflect current circumstances and consider potential family law implications. Incorporate provisions that contemplate separation or divorce.
   
• Transparent financial management: Maintain scrupulous financial records and ensure complete transparency regarding all business interests.
   
• Consider a Binding Financial Agreement (BFA): While not a silver bullet, a BFA, properly executed with independent legal advice, can provide a framework for dealing with business interests in the event of separation, offering a degree of certainty.
   
• Realistic valuations: Obtain an independent business valuation for family law purposes to understand its true value in that context.

In conclusion, Shareholders Agreements are vital commercial tools, but they do not operate in a vacuum when a relationship breaks down. Business owners must understand that the Australian Family Law Courts will scrutinise these documents through the lens of fairness and equity, potentially leading to outcomes that differ from strict contractual terms. Proactive planning and expert advice are therefore indispensable in safeguarding business interests in the face of family law disputes.

Kristy-Lee Burns is a partner at Owen Hodge Lawyers.
23 February 2026
accountantsdaily.com.au

Rare and vanishing: Animals That May Go Extinct Soon

Check out which animals are on the brink of extiction and If we don't act now, they could vanish forever.

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Accountants must keep ‘watchful eye’ on financial abuse

Accountants are being urged to be aware of the risks and signs associated with financial abuse, as estimates show it could be costing the economy nearly $11 billion a year. 

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New research from the University of NSW (UNSW) has unveiled that financial abuse affects more than 2.4 million Australians, with financial professionals called on to be wary, proactive and vigilant in protecting their clients. 

Financial abuse was characterised as a very particular subset of economic abuse, which was an effective form of coercive control involving a person’s bank accounts, credit cards, tax filing and business reporting systems. 

Professor Jan Breckenridge, head of the school of social sciences and the co-convenor of the UNSW gendered violence research network, said she had undertaken “extensive” research and noted the impacts could be particularly severe for older people. 

At the end of 2025, Accountants Daily dove into the topic of elder financial abuse with awareness advocate, Heather Smith, to help accountants learn what warning signs they needed to look out for in elderly clients who may be being taken advantage of. 

Breckenridge echoed similar sentiments to Smith and added that it was important for accountants to be proactive in looking out for red flags that suggested financial abuse, such as not having access to bank accounts, changes to insurance, and having no personal control over funds. 

Unfortunately, in many cases, financial abuse only became visible once a situation had escalated, Breckenridge said. 

“There may not always be warning signs or red flags apparent to others or even the victim of the financial abuse themselves until there is a related crisis,” she said.

“Financial abuse often remains hidden until finances are closely scrutinised, and is frequently first detected at tax time.”

The red flags that often surfaced at tax time that accountants should look out for included limited access to accounts or income, making financial decisions on someone’s behalf, hiding assets, shifting debts, and using business or financial structures to block access to money. 

According to professor Ann Kayis-Kumar, founding director of the UNSW Tax and Business Advisory Clinic, these red flags or the abuse itself could be uncovered during tax preparation, audits, or debt recovery processes, when missing records or unexplained liabilities came to light. 

“Understandably, it can be overwhelming to uncover financial abuse – let alone discover that the ATO will be chasing you for tax debts that you weren’t even responsible for creating or knew existed,” she said. 

“Although accountants and tax agents have professional and ethical duties to act in the best interests of their clients, in practice, we frequently see perpetrators controlling and gatekeeping the relationship with the family’s tax professional.”

“In some cases, tax debts have been created with the assistance of that professional, be it unwittingly or otherwise. This makes it unsafe and impractical for victim-survivors to address the problem through the existing accountant or tax agent.”

Based on this, it was noted to be crucial that accountants were aware of how to treat the situation and to contact the police or the Tax Office immediately if red flags or signs of financial abuse appeared. 

Kayis-Kumar shared that, along with some colleagues, she had researched how perpetrators of financial abuse weaponised Australia’s tax and transfer systems. 

The research – yet to be published – “shed light” on how abusers misused financial documents, legal documents, ABNs, tax file numbers, business structures and refund mechanisms to control financial decisions, restrict decision-making and undermine financial independence. 

“Perpetrators often use a broad spectrum of methods to create tax debts, ranging from: fraudulently creating tax debts in the victim-survivor’s name without their knowledge; using threats or violence to coerce the victim-survivors into creating tax debts; or, providing the victim-survivor with insufficient details so that they do not fully understand the true nature or extent of their tax position or tax debt.”

Late last year, Smith told Accountants Daily that accountants needed to do their part in helping protect the finances of their clients from coercive control or manipulation, for the health and integrity of the tax system, as well as the mental and emotional wellbeing of people. 

03 February 2026
Imogen Wilson
accountantsdaily.com.au

New SMSF education directions

Running a self-managed superannuation fund (SMSF) gives you control over your retirement savings.

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It also means you’re responsible for following complex rules. When things go wrong, education directions are becoming an increasingly important part of the ATO’s governance approach.

Instead of immediately hitting you with penalties, the ATO can require you to complete an approved course about your trustee responsibilities. Practice Statement PS LA 2026/1 clarifies when the ATO will use this tool.

You might receive an education direction if your SMSF has breached superannuation rules and the ATO believes your lack of knowledge contributed to the mistake. the breach wasn’t malicious or fraudulent and you haven’t received an education direction before.

Common contraventions that might trigger an education direction include making loans to members, accessing super early, exceeding investment limits or failing to separate your personal assets and fund assets.

If you receive an education direction, you must complete the specified course within the given timeframe, provide evidence of completion to the ATO and sign or re-sign your trustee declaration within 21 days. Failing to comply results in penalties of up to 10 penalty units (potentially thousands of dollars in fines) and could lead to more serious consequences like trustee disqualification.

Even if you weren’t directly involved in the breach, you can still receive an education direction if you were a trustee when it occurred. All SMSF trustees are jointly responsible for compliance.

Acctweb

Student loans debt update

If you’re among the more than three million Australians with a student loan, there’s welcome news

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The government’s legislation to reduce student loan debt by 20% is now being applied on debt balance as at 1 June 2025, before indexation was applied, with the 2025 indexation recalculated on the reduced debt amount.

Most people were due to receive their reduction before the end of 2025, and more complex reductions are being processed by the ATO in early 2026. The ATO will notify you via SMS, email or your myGov inbox when your reduction has been applied.

If your loan account’s in credit after the reduction is applied, you may receive a refund – although, if you have outstanding tax or other Commonwealth debts, the ATO will apply your credit to these debts first.

An additional change is that compulsory repayments have also moved to a marginal repayment system. Repayments are calculated on the part of your income above starting limit of $67,000 (instead of your total repayment income).

Acctweb

‘Looking like a rough start’: SMEs set to feel the pinch as CPI spikes

Following last week’s spike in December inflation data, economists are warning small businesses to brace themselves to feel the impact.

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Last Wednesday (28 January), the Australian Bureau of Statistics (ABS) released the headline CPI figure, which came in “hotter than expected,” having increased by 3.8 per cent over the year to December 2025.

Additionally, core inflation rose 3.3 per cent in the 12 months to the December 2025 quarter, which exceeded the RBA’s forecast of 3.2 per cent and indicated price pressures would likely continue longer than expected.

Following the release of the data, economists and business leaders warned that this would not only negatively impact homeowners but also small business owners, who continue to tackle tough economic conditions.

David Alexander, ACCI chief of policy and advocacy, said just like households, businesses were also experiencing the pinch of high costs.

Privacy Compliance Sweep 2026: Is Your Business Ready?

The privacy commissioner has launched their first-ever compliance sweep in January 2026.

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Privacy policies of selected businesses are under the microscope, and businesses with non-compliant policies could receive significant penalties. This article explains the privacy compliance sweep, who is being targeted, and how you can ensure your privacy policy is compliant.

What Is the Privacy Compliance Sweep?

Australian businesses should be transparent about the personal information they collect and how they handle it. The privacy commissioner has identified that customers are especially vulnerable when asked for information face-to-face. This is because, unlike online forms where customers can review privacy policies in their own time, in-person requests often pressure people to respond quickly without having full information about how their data will be used. Therefore, the sweep will initially target businesses that collect information during in-person interactions. 

When customers can not properly review privacy policies, you may over-collect personal information and use it in ways customers did not expect or agree to. The privacy commissioner’s goal is to ensure you are transparent about how you use personal information.

Who Is Being Targeted?

All businesses covered by Australian privacy laws must have a compliant privacy policy. However, this initial sweep is targeting six specific sectors.

The privacy commissioner has selected these sectors because they commonly collect personal information in person, including identification documents, and these sectors have experienced many privacy breaches.

The six sectors under review are:

• rental and property; 
• chemists and pharmacists;
• licensed venues;
• car rental companies;
• car dealerships; and
• pawnbrokers and second-hand dealers.

Payday super part 2: not quite ‘all systems go’

The reforms are finally law, but now the work to implement payday super begins.

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The new payday super regime will require employee superannuation to be paid by employers more frequently. In the second of a two-part series, this article explains why the race is now on to get the necessary systems ready in time.

This article is the second in a two-part series that shares the author’s insights on the new Payday Super (PDS) law and implementation of the reforms. Part 1 last week highlighted the problem PDS is designed to solve, recapped the current law, and explained the operation of the new law.

In writing this article, the author has extensively used acronyms for brevity. To assist readers, a list of these acronyms and terms is provided at the end of the article.

Now the work begins

The PDS reforms are now law and start on 1 July 2026. The reforms will require employers to pay their employees’ superannuation at the same time as salary and wages, instead of quarterly. Small business employers are most likely to find the cash flow challenges associated with PDS harder to navigate. With less than eight months to go, the race is on to get systems and employers ready for the most substantial change to superannuation in more than 30 years.

The legislative framework is finally in place. The focus now turns to the digital service providers (DSPs) who, understandably, have been waiting for the enacted law before proceeding and commercially investing time and money in the extensive work required to upgrade payroll and related systems in readiness for PDS.

The government acknowledged in the explanatory memorandum to the enabling legislation that:

Changing the frequency of SG payments would require significant work for DSPs, which produce and maintain the systems used by employers and superannuation funds to record, report and process SG contributions.

Further:

Providing 18 months in lead time between the planned legislation of the changes in late 2024 and the start date of 1 July 2026 will also mitigate negative impacts on DSPs.

As it has played out, the law being assented last week means that DSPs have less than eight months to design, test and roll out the necessary systems so employers can implement changes in their processes, enabling them to comply from their first qualifying earnings (QE) day on or after 1 July 2026. Other intermediaries, such as payroll service providers, clearing houses and similar support services, are more than mere observers; they must also make substantial changes to their systems and processes.

What’s still an issue?

A short runway to 1 July 2026

Concerns regarding the readiness of the system and employers from 1 July 2026 were frequently raised throughout consultation, particularly given that, just over a month ago, the enabling legislation had not yet been introduced.

Even the ATO has acknowledged these concerns:

There is concern that employers will not have had sufficient time to deploy, test and embed changes within their payroll systems and business processes prior to Payday Super law commencing on 1 July 2026. This increases the risk that employers will be unable to fully meet the requirements to reliably have contributions processed and accepted by super funds in the Payday Super timeframes.

Practical approaches, including a minimum 12-month deferral or transitioning large employers to PDS before small business employers, were repeatedly recommended by the professional associations and other key stakeholders. Yet, the Government has remained firm on its announced start date of 1 July 2026.

ATO transitional approach

Disappointingly, a warranted but absent transitional rule of law to gently ease employers into the new regime has instead been addressed through an ATO administrative position that provides little protection or certainty to employers.

The ATO has published draft guidance on its compliance approach for the first year of PDS. PCG 2025/D5 sets out the factors the ATO will consider when deciding how to apply its compliance resources to investigate employers who try to do the right thing from 1 July 2026 to 30 June 2027. The ATO recognises that these employers should not be the focus of ATO compliance action.

The ATO will prioritise compliance resources in respect of employers in the high-risk (red) zone ahead of those in the medium-risk (amber) zone. The ATO will not have cause to apply compliance resources in respect of employers in the low-risk (green) zone.

●              Green zone: the employer attempts to reduce their shortfall to nil by making sufficient on-time contributions, but some of or all the contributions were not received by the fund within the usual period, and the contributions are received by the fund and allocable for the employee’s benefit as soon as reasonably practicable.

●              Amber zone: the employer does not meet the criteria to be in the green zone but has no shortfalls by 28 days after the end of the quarter in which the QE were paid. This would apply to an employer that makes sufficient contributions but does not change the frequency of contributions in line with PDS.

●              Red zone: the employer does not meet the requirements to be in the green or amber zone and has one or more shortfalls by 28 days after the end of the quarter in which the QE were paid.

I say that the ATO’s compliance approach provides little protection or certainty to employers during 2026–27 for the following reasons:

●              Falling within the green zone does not mean that the employer will not be liable for the SG charge. It means that the ATO won’t allocate compliance resources to investigate those employers who are considered to fall into the green zone.

●              The ATO cannot disregard the law. It must assess the SG charge if it obtains information that an employer has a shortfall in respect of a QE day, even if the employer falls within the green zone.

●              An employer may consider they fall within the green zone, but the ATO will decide whether contributions are received by the fund and allocable for the employee’s benefit as soon as reasonably practicable.

●              An employer may be in the green zone for some QE days and move to another risk zone for other QE days. This is likely to confuse employers.

●              The PCG contains no guidance or examples where the contribution is late due to delays or factors beyond the control of the employer, leading to uncertainty. This is likely to be a common issue for employers.

●              The PCG does not have any impact on obligations to pay superannuation contributions under other laws or industrial instruments and agreements.

●              The PCG does not prevent an employee from making a complaint and taking recovery action under the National Employment Standards (see below).

National Employment Standards

The National Employment Standards (NES) make up the minimum entitlements for employees in Australia. Superannuation is an entitlement under the NES. Entitlements to superannuation under the NES align with the superannuation laws, so an employer who complies with the SGAA also meets their obligations under the NES.

A breach of the NES means that most employees covered by the NES can take court action against their employer under Part 4-1 of the Fair Work Act 2009 (FWA) to recover unpaid superannuation, unless the ATO has already commenced proceedings in relation to that superannuation.

Whether the ATO investigates an employer that has not paid the minimum SG for their employees is completely independent from whether employees take legal action against their employer under the FWA for late or non-payment of superannuation.

Usual period

Eligible SG contributions received by employees’ funds and allocable to the employee’s account within seven business days after the QE day (the usual period) can reduce the shortfall for that QE day to nil. The usual period of just seven business days will be extremely challenging for employers.

Processing times vary, but contributions commonly take up to 10 days to reach the fund when passing through commercial clearing houses. Even if the employer makes the payment on the QE day, when the fund receives the contribution is clearly out of their hands.

On one hand:

●              commercial pressures on clearing houses, DSPs and other intermediaries to meet the market demands of employers and facilitate them in making SG payments within the usual period are likely to reduce processing times;

●              a longer period of 20 business days has been allowed for new staff, change of funds and for exceptional circumstances; and

●              the deadline for funds to allocate or return contributions that cannot be allocated to an employee’s account has been reduced from 20 business days to three business days.

On the other hand, the scope of what constitutes ‘exceptional circumstances’ seems narrow and would likely not apply to:

●              common delays in processing or banking;

●              computer and system glitches that are not widespread outages; or

●              payroll staff absences.

Despite the employer’s best efforts, contributions could easily be late. This commonly happens when incorrect employee details are supplied. If a fund receives an on-time contribution within the usual period and returns the amount to the employer because it could not be allocated to the employee’s account, the employer would not have made an eligible contribution. The employer is unlikely to have sufficient time to obtain the correct employee details and attempt to repay the SG, so that an on-time contribution is made.

Employers bear all the risk and are fully exposed. Employers have no comfort that their payments will be received and be allocable to their employees’ accounts within the usual period, yet they remain solely liable for the SG charge should the exceedingly tight timeframe be exceeded. There is no wriggle room for something to go wrong, and no time to correct it. This is unreasonable.

Overpayments

Any overpayments by an employer for a QE day are automatically applied to offset any subsequent SG for that employee. But this approach supposes that the employee continues to be employed by, and has future QE days with, the employer.

Where the employer pays more than the SG for a QE day and the employee leaves the employer, the overpayment cannot be recovered. This could easily occur when QE are paid, say, monthly, two weeks in arrears and two weeks in advance, SG is paid based on the QE, and the employee leaves abruptly without being entitled to the QE paid in advance.

Some employers may be considering prepaying SG amounts (up to 12 months) to avoid any risk of not making contributions on time. However, this approach poses a separate risk of paying amounts for employees who depart during the year, resulting in overpayments that cannot be recovered.

Managing cash flow

Cash flow will be the single largest PDS issue for many small businesses to navigate. Moving from quarterly to as frequent as weekly payment obligations will likely place an enormous strain on cash flow.

Some employers are thinking of changing to less frequent payroll cycles. Transitioning to monthly payroll may improve cash flow, but employers must be aware that such a change may be prohibited by relevant awards, enterprise agreements or employment agreements. Some awards and agreements require employers to pay their employees weekly or fortnightly. A monthly cycle may not be permitted. Employers should seek independent advice before attempting to shorten the frequency of their payroll cycle to ensure they comply with relevant laws, awards and agreements.

Further, monthly payroll is usually unpopular with employees as they are paid less frequently. It could lead to dissatisfaction levels that affect staff retention. Employers should carefully weigh the operational benefits against the possible impact on employee satisfaction before making any changes to payroll frequency.

Monthly payroll may also increase the risk of overpayments, as discussed above.

Small Business Superannuation Clearing House

As part of the PDS reforms, the ATO’s Small Business Superannuation Clearing House (SBSCH) will be retired from 1 July 2026. The SBSCH has been closed to new users since 1 October 2025.

Hundreds of thousands of users will need to find a commercial clearing house or adopt suitable payroll software. Those employers who do not prepare for the closure may find themselves rushing to source alternate ways to pay their SG for the June 2026 quarter by 28 July 2026 or risk becoming liable for the SG charge. Practically, the March 2026 quarter may be the last one that is processed through the SBSCH.

Maximum contribution base and employer shortfall certificates

As explained in Part 1, the current maximum contribution base (MCB) will apply annually instead of quarterly. Once an employee’s QE exceed the MCB in a financial year, any subsequent QE by that employee in that year, paid by their current or subsequent employer, are disregarded in calculating any shortfall amount.

The employer shortfall exemption certificate rules have been modified to allow employees to apply for a certificate if they have more than one employer in the same financial year, consecutively as well as concurrently. If a certificate is in force, the employee is treated as having reached the MCB. The employee can provide the certificate to their new employer, who is not liable for the SG charge if they don’t pay SG for that part of the employee’s QE above the MCB.

Under the current law, when an employee exceeds the MCB, their SG contributions max out at $7,500 a quarter. Under PDS, assuming the concessional contributions cap remains $30,000 in 2026–27, the annual MCB would be $250,000, and the maximum SG for the year would be $30,000.

Applying the MCB annually rather than quarterly is likely to increase the complexity of salary packages, as the cap will be reached before the end of the financial year. The more the employee’s QE exceed the MCB, the sooner in the financial year the MCB will be reached. The consequences will also depend on:

●              whether the employee’s remuneration package is inclusive or exclusive of SG; and

●              the extent to which the employee, on a package inclusive of SG, can seek to have their salary component recalibrated within the terms of their employment contract once the MCB is reached and the employer no longer has an SG obligation for the remainder of the year.

In the case of salary plus SG, the salary component will not change when the cap is reached.

Example

Employee 1 has an annual salary of $450,000, including SG, paid monthly. Employee 1 will reach the MCB in February. They should seek to have their gross salary for the remaining five months of the financial year increased from $33,482.14 to $37,125.00, so that their salary for the year is $420,000 plus SG of $30,000, equating to a total package of $450,000.

Employee 2, in contrast, has an annual salary of $450,000, plus SG, also paid monthly. With $4,500 a month of SG, Employee 2 will reach the MCB in January. However, while the employer stops paying SG in February, Employee 2’s gross salary for the year remains unchanged at $37,500 per month. So, their salary for the year is $450,000 plus SG of $30,000, equating to a total package of $480,000.

Foreign employers

No changes have been made to the SG rules as they apply to foreign employers. This means foreign employers that have non-resident employees working within Australia will need to pay SG under PDS at the same time as they pay the employees’ QE, unless they are covered by a bilateral social security agreement that exempts them from paying SG in Australia. Foreign employers must pay SG for resident employees working here.

Foreign employers that do not have any employees working in Australia have no SG obligations.

Australian employers must continue to pay SG for resident employees working overseas, but may apply for a bilateral social security agreement that exempts Australian employers from their SG obligations in the country where their employee is temporarily working.

Complying status of SMSFs

The following comments relate to self-managed superannuation funds (SMSFs) as APRA-regulated funds are less likely to be non-complying funds.

To comply with the SGAA, employers must make SG contributions to a complying fund. Employers can use Super Fund Lookup (SFLU) to check if a fund is a complying fund or obtain written confirmation from the fund’s trustee.

Aside from employers needing to check whether their employees’ SMSFs are complying funds so they can receive SG contributions, they also need to be aware that once an SMSF’s annual returns are two weeks overdue, the status of the fund changes to Regulation details removed on the SFLU. Once this happens, SuperStream prevents the employer from making SG contributions to the fund. Once the employer is notified of this, they are left with only a few business days to redirect the contribution to another complying fund to meet their SG obligations.

The overlay of PDS means employers will have to be even more diligent with checking the compliance status of their employees’ SMSFs. Ideally, prudent employers would check this each QE day, but this is hardly practical. Given this, the increased frequency of paying SG may make SMSFs less attractive to employers, but they must still comply with the choice of fund rules.

Closing comments

With so many aspects to PDS, employers, tax professionals and bookkeepers must be across the new rules. While the DSPs are busy designing the new systems that will be needed, tax practitioners can start having the necessary conversations with their clients now. Employers can start to review their software, systems and processes to identify what is needed to be PDS-ready.

We have only a short runway to 1 July 2026, and we cannot still be building the aircraft as it’s taking off. With the festive season soon upon us, we have effectively only a little over six working months to get all systems go.

Acronyms and terms used in this article

●              ATO                                    Australian Taxation Office

●              DSPs                                   Digital service providers

●              FWA                                   Fair Work Act 2009

●              MCB                                     Maximum contribution base

●              NES                                     National Employment Standards

●              PDS                                     Payday Super

●              QE                                      Qualifying earnings

●              QE day                              Day on which QE are paid

●              SFLU                                    Super Fund Lookup

●              SG                                      Superannuation Guarantee

●              SGAA                                    Superannuation Guarantee (Administration) Act 1992

●              SMSFs                                 Self-managed superannuation funds

●              Usual period                     Seven business days after the QE day

17 November 2025
By Robyn Jacobson, Tax Advocate and Specialist
accountantsdaily.com.au