iscover Payday Super developments: Contractors miss out but Under 18s benefit
SuperThere have been two noteworthy recent developments for Payday Super. The first relates to what types of out-of-cycle payments will be eligible for a contribution extension and the second relates to the Senate Committee recommendation to remove the under 18s/under 30 hours superannuation exemption.
Payday Super and Out-of-Cycle payments:
Draft legislative instrument LI 2026/D3 on Out-of-Cycle payments for Payday Super purposes, has been issued by the Australian Taxation Office (ATO) on 8 May 2026. At the same time, the ATO has issued some brief information on their website regarding the timing requirements for super on payments made to sole trader contractors under Payday Super regime. A key takeaway from the draft instrument is that payments to contractors will not qualify as out-of-cycle payments.
Under the Payday Super regime commencing on 1 July 2026, employers must pay superannuation contributions into an employee’s superannuation fund within 7 business days following payday, rather than quarterly under the current system.
However, an extended period to pay contributions is allowed for out-of-cycle payments, which are payments of earnings made on a day other than the employer’s usual payday (e.g. outside of weekly, fortnightly or monthly payroll cycle). Superannuation contributions related to out-of-cycle payments must be paid into an employee’s superannuation fund within 7 business days after the employer’s next usual payday.
Out-of-cycle payments that can qualify for extension are allowances, bonuses, commissions, loadings, payments in advance and back payments, where paid on a day that is different to the usual payday.
Employers need to consider in their payroll procedures which earnings and circumstances will be taken to be out-of-cycle, thus qualifying for the contribution extension.
Employers need to be mindful of payments to sole trader contractors. Payments to contractors which require superannuation will not be eligible for the out-of-cycle contribution extension. Therefore, superannuation contributions must be paid into the contractor’s superannuation fund within 7 business days from the date the invoice is paid.
Senate Committee report out on payday super regulations
The Senate Economics Legislation Committee released their report on 11 May 2026 on their review of the Payday Super Regulations.
The significant finding is a recommendation to remove the Under 18s/ Under 30 hours exemption.
The exemption from the superannuation guarantee for employees under 18 years of age and employed to work not more than 30 hours per week was previously contained in the Superannuation Guarantee (Administration) Act 1992. Under the Payday Super regime, this has been moved to the regulations.
The Committee supported extending superannuation coverage to workers under 18, and noted that some employers such already pay superannuation to workers under 18. However, the Committee does caution that “extending the superannuation guarantee to under 18s would require careful consultation with unions, civil society, employers and further detailed work to understand the impacts”.
Also of note is that the Committee made no recommendations in relation to the other Regulations (including the admin uplift reductions, exceptional circumstances etc).
Judy White, executive director, Tax Corporate & International Tax, BDO
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