iscoverWhile Payday Super has been widely welcomed by the tax and super community, the impacts it will have on small businesses may be detrimental to their success.
Payday Super: how will SMEs be impacted?
29 October 2025
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9 minute read
The tax, super and business communities have welcomed the introduction of Payday Super to parliament, yet warnings about how it may impact the prosperity of small businesses have begun to surface.
Judy White, BDO executive director of tax, previously shared with Accountants Daily the intricacies of the Payday Super legislation, what it will mean for employers and how the ATO planned to administer it, as outlined in its practical guidance.
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Since then, White, alongside the Council of Small Business Organisations Australia (COSBOA), has shared the significant impact on small business employers, especially within the first year of implementation.
White said although the proposed Payday Super legislation would impact all employers no matter size, industry or location, it would be particularly significant for the small business sector – businesses with less than $10 million aggregated turnover.
“Challenges for all businesses, particularly for small businesses, include the cash flow impacts of contributing super earlier from a quarterly to a payday basis, compliance costs relating to payroll software upgrades, utilising commercial clearing houses, and the administrative costs of updating policies and procedures,” she said.
“The closure of the Small Business Superannuation Clearing House operated by the ATO from 1 July 2026, and the new 7 business day compliance requirement for contributions every Payday, will accentuate this impact on small businesses.”
Based on these perceived impacts, White said it was imperative for the ATO to provide assistance and “carve outs” from compliance activities for small businesses.
Having already provided a detailed overview of the ATO’s practical guidance previously, White said she believed to support small businesses, changes needed to be made to the compliance guideline.
“One suggestion is that all small businesses that would otherwise fall into the medium risk zone in the ATO’s draft guideline PCG 2025/D5 issued on 9 October 2025, should be categorised as low risk, meaning that the ATO will not have cause to review the employer’s actions in the first year (and ideally extended to 24 months),” White said.
“A further suggestion is that the draft ATO guideline should have provisions to enable the ATO to consult and educate for the first year of the proposed Payday Super regime, rather than investigate and apply compliance resources.”
White added she believed there should be no imposition of penalties by the ATO in the first year for non-compliance and flagged that small businesses could be identified for these purposes by the ATO through matching to the small business label completed in their income tax return.
COSBOA also spoke out about the potential negative impacts of Payday Super with the overarching message that the start date of 1 July 2026 was too soon for small businesses to adopt.
Matthew Addison, COSBOA chair, warned that the current timeline and compliance design risked overwhelming small businesses and undermining the intent of the reform as the proposed legislation “lacked realism”.
“We support the intent of Payday Super, but good policy needs to work in practice,” he said.
“Small businesses want to do the right thing, but they need time to prepare, support to manage the compliance costs, and fair treatment when system failures occur that are outside their control.”
Addison’s suggestion to tackle this was a phased implementation, moving first to payments by 1 July 2026, before the full Payday Super was implemented no earlier than 1 July 2030.
“This is one of the biggest payroll changes in decades. Small businesses want to get it right – but they need a clear, practical and achievable pathway to do so,” he said.
“Payday Super can be a good reform if it’s built on solid foundations. Let's take the time to build it properly.”
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