Payroll Compliance Under Payday Super: 10 Key Risks

With Payday Super requiring employers to pay superannuation at the same time as wages, payroll compliance is about to come under much sharper scrutiny. The ATO will receive more frequent and more accurate data through Single Touch Payroll (STP), meaning errors that previously went unnoticed until quarter-end will now surface much sooner.

We will also be running a webinar: Payday Super Changes: What Employers Need to Know Before July 2026 on Thursday 29 January at 1.00pm (AEST). Register now to secure your spot.

If you are still getting up to speed on what Payday Super is and when it starts, read our guide: “What Is Payday Super And What Do Employers Need To Think About Now?” first, then come back to this article for a deeper dive into payroll compliance risks.

For employers, this means your payroll compliance processes, classifications and controls need to be more robust than ever.

Here are the top 10 compliance risks no employer can afford to ignore.

1. Employee Classification Errors

Misclassifying workers (for example, casuals vs part timers, contractors vs employees) can cause:

missed super payments
incorrect super rates
exposure to Super Guarantee Charge (SGC)
backpay liabilities

Payday Super shortens the correction window significantly, so errors must be fixed immediately. Getting employee classifications right is a core part of payroll compliance under the new regime.

2. Superable vs Non-Superable Payments

Some allowances and payments attract super; others do not. Common problem areas include:

overtime vs ordinary hours
travel allowances
meal allowances
leave loading
bonuses and commissions

With super due on payday, any misinterpretation of superable payments will lead to instant underpayments and immediate payroll compliance issues, rather than something you can tidy up at quarter-end.

3. Contractor Risk

The ATO’s definition of an “employee for SG purposes” is broad. Contractors may attract super even if:

they have an ABN
they submit invoices
they call themselves “contractors”

This is one of the most common sources of SG non compliance and will be even riskier under Payday Super. Reviewing contractor arrangements now is essential to keep payroll compliance intact once the new rules begin.

4. Incorrect Timing = SGC Exposure

Under Payday Super:

late super means automatic SGC exposure
SGC is not tax deductible
interest and administration fees apply
disclosures may be required

The reduced time window means payroll teams cannot rely on quarter-end corrections anymore. Timing becomes a key element of payroll compliance, and late payments will also create knock on cash flow pressure.

We explore the impact of Payday Super on cash flow in our blog: “Cash Flow Planning for Payday Super: How to Avoid Surprises”.

5. Reliance on Manual Calculations

Manual handling of:

super calculations
adjustments
backpay
termination payments

…will create major compliance risks.

Every payroll cycle must be accurate because you cannot fix super after the fact without triggering late payment penalties and SGC.

Automating calculations and building clear review checkpoints into each pay run is fundamental to strong payroll compliance under Payday Super.

6. Payroll System Configuration

Many payroll systems will require updates for:

real-time SG calculation
instant super export files or direct clearing house integration
STP Phase 2 mapping
award and enterprise agreement changes

Incorrect configuration will automatically flow into super errors, even if staff are doing everything else correctly. Take a read of our blog about Payday Super And Payroll Processes: The Changes You Need To Plan For.

Before Payday Super starts, employers should work with their software providers or advisers to validate that system settings are correct and tested.

7. Cleansing Allowance and Pay Code Structures

Incorrect pay codes are one of the most frequent causes of super mismatches and payroll compliance failures.

Before Payday Super starts, employers should review:

all pay items
super flags
overtime rules
broken shift allowances
cash-out of leave

Fixing pay codes and allowance logic payroll processes now prevents repeated SG underpayments once Payday Super is live.

8. Onboarding and Offboarding Processes

Missed or late super often comes from poor data capture and weak processes when people join or leave the business, such as:

start dates
termination dates
fund details
TFNs
eligibility rules

Under Payday Super, late onboarding or overlooked changes can mean instant late super and payroll compliance breaches. Strengthening onboarding and offboarding checklists, and making sure payroll receives complete, timely information, is critical.

9. Contractor and Labour Hire Arrangements

Labour hire and contractor structures often contain hidden SG risks. Common red flags include:

sham contracting
labour-hire misinterpretations
contractors paid mainly for labour
high-risk industries (cleaning, IT, construction, logistics)

ATO scrutiny in this area is already high and Payday Super will amplify it, as patterns of underpayment become easier to spot in near real time. A review of contractor and labour hire arrangements should be part of any Payday Super payroll compliance project.

10. Internal Controls and Payroll Reconciliation

Quarterly super reconciliations will no longer be enough. Employers must introduce:

per-pay-run payroll-to-super reconciliations
automated variance reports
exception reporting
funding reviews for every payroll cycle

These controls are now essential to avoid SGC liabilities and to demonstrate sound payroll compliance if the ATO reviews your business.

For many organisations, this will also involve tightening broader processes, systems and governance around payroll.

Bringing It All Together: Payroll Compliance In A Payday Super World

Payday Super changes the payroll compliance landscape. Errors that may have gone unnoticed for months will now be detected quickly through STP and super payment data.

Employers who strengthen payroll governance now will: