iscover Joint bodies say employers are ‘set up to fail’ in Payday Super regime
BusinessIndustry bodies say the new regime relies heavily on administrative tolerance rather than legal certainty and have called for sweeping changes.
In a submission last month, joint accounting bodies called for transitional relief for the Payday Super (PDS) legislation that commenced on 1 July 2026. The Australian Bookkeepers Association, CA ANZ, CPA Australia, the Institute of Certified Bookkeepers, the IPA, the SMSF Association and The Tax Institute (the joint bodies) said that the timing of the required contributions may lead to ramifications for businesses.
“PCG 2026/1 provides no assistance or relief from excess contributions tax for employees. Without targeted treatment, these timing differences may lead to unintended outcomes, including confusion in reporting and potential issues with contribution caps and excess contributions tax,” the submission said.
“Employers who are genuinely attempting to satisfy their legal obligations appear to be set up to fail.”
The bodies called for a “reasonable, legislated transition period” to allow for compliance with significant changes to the way employers manage payroll and superannuation contributions.
“This approach would support better long-term compliance outcomes without undermining the policy intent of Payday Super.”
The submission noted that its recommendations aim to protect small businesses that are doing “everything within their control to comply”.
“While the ATO’s administrative approach recognises that errors may be corrected, it does not provide certainty where a breach is identified under the law.”
In addition, the submission noted that penalties should be proportionate to conduct history.
Feedback from members said that employers may be liable to penalties for lodging contributions in the “late-period” despite taking reasonable steps to comply, the joint bodies said.
“This issue arises where delays occur in parts of the process outside the employer’s control.”
“Penalty outcomes should distinguish between inadvertent errors and deliberate non-compliance, ensuring that employers who make genuine efforts to comply are not treated in the same way as those engaging in intentional or repeated breaches.”
“Consideration should also be given to allowing employers with a good compliance history to voluntarily disclose and correct errors without penalty, on an ongoing basis and not limited to the transition period.”
While the ATO has its Practice Statement Law Administration PS LA 2026/D3 - Payday Super: exceptional circumstances determinations, the joint bodies said that this statement was “limited to significant and widespread events and may not adequately capture more common, localised disruptions affecting individual employers.”
It noted that PDS, in its current form, introduces practical implementation challenges during the transition period.
“While PCG 2026/1 provides administrative guidance, it does not remove the Commissioner’s obligation to apply statutory penalty provisions where a contravention is identified,” the submission said.
“The current framework relies heavily on administrative tolerance rather than legal certainty,” the submission said.
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Carlos Tse
Carlos Tse is a graduate journalist writing for Accountants Daily, HR Leader, Lawyers Weekly.