COSBOA warns Payday Super timeline risks chaos

Small-business advocates have warned the government’s Payday Super timeline risks chaos without more time, cost support, and fair penalties.

The Council of Small Business Organisations Australia (COSBOA) has called on the federal government to adopt a more realistic approach to implementing Payday Super, warning that the current timeline and compliance design risk overwhelming small businesses and undermining the intent of the reform.

COSBOA chair Matthew Addison said while the organisation supports the principle of Payday Super – ensuring workers’ superannuation is paid regularly and transparently – the reality for small business is that the systems, time frames, and costs have not been properly accounted for.

“We support the intent of Payday Super, but good policy needs to work in practice,” Addison 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.”

Under the proposed legislation, employers will be required to ensure superannuation contributions reach employees’ funds within seven business days of each pay cycle, with the system due to begin on 1 July 2026.

Currently, this process typically takes five to 10 business days, and COSBOA warned the proposed time frame is unworkable without significant upgrades across payroll software, clearing houses, super funds, and the Australian Taxation Office (ATO).

“We’re trying to build a complex new system on foundations that aren’t ready,” Addison said.

“Every payroll provider, super fund and gateway needs to redesign and test their systems before launch, and that takes years, not months. The government’s own papers say it can take up to three years to implement. Right now, we have eight months.”

COSBOA has urged the government to take a pragmatic approach and make three key changes before the laws take effect.

First, it recommends a phased implementation – moving firstly to monthly payments by 1 July 2026, with full Payday Super no earlier than 1 July 2030 – to allow time for payroll and super systems to be built, tested, and integrated and for employers to adapt.

“Rushing this reform risks chaos. We need a proper foundation before enforcement begins,” Addison said.

Second, COSBOA has called for cost support, saying that the transition will bring significant new costs for small businesses through higher software subscription fees, transaction charges, and administrative time.

“The government’s own Regulatory Impact Statement estimates the cost at just $151 per employer per year. That figure is not the reality,” Addison said.

“This is essential national infrastructure. Small businesses and the software developers who enable them should be supported to implement it.”

Third, COSBOA said fair penalties must be introduced. Under the proposed law, employers may face penalties even when super payments are delayed or rejected for reasons beyond their control, such as super fund errors or clearing house delays.

“A small business that has paid on time and done everything right should not be penalised because another part of the system has failed,” Addison said. “Employers should only be penalised if they miss a payment deadline.”

COSBOA has also raised concerns that the ATO’s proposed “Voluntary Disclosure Statement” system will not integrate with payroll software, requiring employers to manually re-enter data to confirm compliance.

“That’s not reducing red tape – it’s doubling it,” Addison said. “If the ATO is serious about modernisation, data should flow automatically through employers’ existing payroll systems.”

Addison said COSBOA welcomes the government’s willingness to consult, but urged ministers to listen carefully to what small businesses are saying before the system is rolled out.

“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.”