Government urged to extend concessional cap relief to current income year

In a recent submission, the NTAA said that while it supports these amendments, this relief does not address the excess contributions that will arise in the current income year, which will also arise directly from the transition.

The NTAA noted that many employers are likely to bring forward payment of SG contributions for the June 2026 quarter to facilitate a smooth transition to Payday Super.

"Where an employer paid SG contributions for the June 2025 quarter in July 2025 and brings forward payment of SG contributions for the June 2026 quarter from July 2026 to June 2026, affected employees may exceed their CC cap due to decisions beyond their control," it said.

"The ATO has advised that it is unlikely to be able to exercise its discretion under section 291-465 of the Income Tax Assessment Act 1997 (Cth) where government transitional relief does not extend to 2025–26."

The NTAA stressed that no employee should be subject to excess contributions tax because of the introduction of Payday Super, where changes to the timing of SG contributions and decisions made by their employer are beyond their control.

"We therefore ask the Government to extend the proposed transitional relief for 2026–27 to the 2025–26 income year," it said.

The submission also called for the ATO to provide some additional clarification on the definition of qualifying earnings (QE) in its draft Law Companion Ruling LCR 2026/D1.

The NTAA noted that paragraph 72 of LCR 2026/D1 states that payments of qualifying earnings (QE) include commission payments, payments to persons who fall within the extended meaning of employee under section 12, and payments that are part of a salary sacrifice arrangement.

The ATO's web guidance explains that amounts that would otherwise be QE but are salary-sacrificed to superannuation are included in QE.

It also says that QE includes amounts that are salary-sacrificed to superannuation, where the sacrificed salary would otherwise be QE if it were instead paid to the employee.

However, QE excludes amounts that are salary-sacrificed to superannuation where the sacrificed salary would not otherwise be QE if it were instead paid to the employee, such as paid parental leave or overtime. It also excludes amounts that are salary-sacrificed to other employee benefits, including fringe benefits and exempt benefits.

"As the composition of a salary sacrifice arrangement may vary, the amount of QE may differ accordingly," the NTAA said.

"However, paragraph 72 of LCR 2026/D1 does not clearly articulate which salary-sacrificed payments constitute QE and which do not, creating uncertainty for employers when determining an employee’s QE."

The NTAA said the ATO should amend paragraph 72 to clarify that ‘payments that are part of a salary sacrifice arrangement’ include amounts salary-sacrificed into superannuation where they would have been QE if they were instead paid to the employee, but exclude:

• Amounts that are salary sacrificed into superannuation that would not have been QE if they were instead paid to the employee (such as paid parental leave or overtime); and

• Amounts that are salary-sacrificed as fringe benefits, exempt benefits and any associated FBT liability.

Further clarification is also needed on how QE is defined in situations where a person is providing their services under a contract that is wholly or principally for their labour, the NTAA said.

"The draft ruling does not provide sufficient guidance with respect to certain elements of these arrangements," it said.

"We suggest that paragraph 75 be amended to provide further clarity with respect to contracts that are wholly or principally for a person’s labour."