Retirement
Small businesses brace for cash flow challenges as Payday Super becomes law
Retirement
Small businesses brace for cash flow challenges as Payday Super becomes law
With the new Payday Super legislation now enacted, small businesses across Australia are preparing for a significant shift in how they manage superannuation contributions. The law, which mandates a transition from quarterly to payday super contributions, is set to take full effect by July 2026. Employment Hero, a leading HR and payroll platform, has stepped forward with resources to aid small and medium-sized businesses (SMBs) in navigating this transition.
Small businesses brace for cash flow challenges as Payday Super becomes law
With the new Payday Super legislation now enacted, small businesses across Australia are preparing for a significant shift in how they manage superannuation contributions. The law, which mandates a transition from quarterly to payday super contributions, is set to take full effect by July 2026. Employment Hero, a leading HR and payroll platform, has stepped forward with resources to aid small and medium-sized businesses (SMBs) in navigating this transition.
According to early modelling shared by Employment Hero, SMBs will require an estimated $124,000 in additional working capital under the new seven-day rule. This substantial financial adjustment comes with the risk of severe penalties for non-compliance. To assist businesses in understanding and preparing for these changes, Employment Hero has introduced a free Payday Super Calculator. This tool allows employers to input their headcount, pay cycle, and wage bill to determine the necessary reserves to remain compliant and solvent.
"The final legislation expects SMBs to get Payday Super right from the outset, even while parts of the system that employers rely on are still being upgraded," said Ben Thompson, CEO of Employment Hero. "At the same time, hundreds of thousands of SMBs will need to move off the ATO’s Small Business Superannuation Clearing House (SBSCH), set to close 1 July 2026. That’s a big ask, especially when you consider the 60% increase in admin overheads and $124,000 cashflow impact the average SMB will face on day one."
The Payday Super Calculator is part of Employment Hero’s broader initiative to ensure businesses are ready for the upcoming changes. The company is also rolling out HeroClear, a pioneering solution designed to protect businesses from increased administrative burdens and the risk of penalties. HeroClear offers a fully embedded super clearing and validation solution, tailored specifically for the Payday Super requirements.
"That’s why we’re building the solutions to make compliance practical even before the 1 July deadline," Thompson explained. "We’re embedding super clearing directly into Employment Hero Payroll. By validating fund details up-front, moving money in real-time, and providing live confirmations and a single audit trail, SMBs will see fewer errors, faster settlement and clear proof of action to meet new requirements. That means better outcomes for business and employees alike."
For many employers, the impact of this legislative change on cash flow remains unclear. The Payday Super Calculator aims to demystify this by providing concrete numbers. For instance, a handyman services company with 10 employees, each earning an average salary of $75,000, will need an additional $27,692 in annual working capital to comply with the new requirements. This translates to an extra $3,462 required every pay run starting from July 2026.
The transition to payday super contributions is expected to present a formidable challenge for many SMBs, particularly those that have relied on the ATO’s Small Business Superannuation Clearing House. With the SBSCH set to close in 2026, businesses will need to adopt new systems and processes to manage their superannuation obligations effectively.
Employment Hero’s Payday Super resource hub is available to provide further guidance and support for businesses as they prepare for these changes. The hub offers a wealth of information and tools designed to help employers understand the implications of the new legislation and ensure they are ready to meet the upcoming requirements.
As the deadline approaches, the focus for many SMBs will be on adapting to these changes efficiently and effectively. With Employment Hero’s tools and resources, businesses have the opportunity to not only comply with the new law but also streamline their payroll processes and improve outcomes for both their operations and their employees.
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