Payday Super to bring business cash flow into focus

Why the move to real-time super payments may bring financial stress to the surface sooner for some businesses.

According to the Australian Taxation Office, around $6.2 billion in super went unpaid in 2022–23, representing roughly six per cent of the Superannuation Guarantee employers were required to pay.

The Federal Government hopes to tackle that gap with the introduction of Payday Super, which from 1 July 2026, will require employers to pay superannuation at the same time as wages rather than to be paid quarterly.

From an insolvency perspective, Payday Super is likely to be as much a liquidity reform as a compliance one, removing one of the last timing buffers businesses have traditionally relied on to manage working capital.

“Payday Super will expose how superannuation is actually being used within the cash flow of the business versus being paid to employees as per their required and statutory entitlement,” explains Jimmy Trpcevski, Managing Partner of WA Insolvency Solutions (WAIS), Jirsch Sutherland’s WA division.

The disappearing buffer

For decades, the quarterly superannuation payment cycle has given businesses a degree of timing flexibility. While wages are often paid weekly or fortnightly, superannuation has typically been remitted every three months. Payday Super effectively removes that buffer.

For some businesses, superannuation has effectively functioned as a short-term source of working capital. Removing that flexibility may expose underlying liquidity pressures that were previously manageable under the quarterly payment system. For businesses with strong liquidity, the change may be largely administrative. However, for companies operating with tight margins, seasonal income or heavy payroll costs, the shift brings a liability forward that was previously paid months later.

In practice, missed super payments are often one of the earliest indicators of financial distress in a business, particularly where cash flow is already tight.

Trpcevski says the reform may accelerate the timing of insolvency appointments for some businesses. “We will likely see both outcomes – some appointments simply happening earlier and in other cases the reform acting as the trigger for directors to make an appointment,” he says.

Industries most exposed

Not every business will feel the impact equally. Those with high payroll costs and tighter margins are likely to face the greatest pressure. Industries most exposed include:

• Construction
• Labour hire
• Hospitality
• Healthcare and care services

“Businesses with uneven or seasonal revenue may also find the transition difficult, particularly where income does not align neatly with payroll cycles,” adds Trpcevski.

Recent survey data suggests many businesses may also be underprepared for the change. A Prospa-YouGov survey found 30 per cent of SMEs were unaware of the upcoming reforms and 14 per cent said they may struggle to meet the new payment schedules, highlighting the potential cash-flow shock the new rules could create.

“In many cases, the challenge is not profitability but timing – the ability to meet wages, tax and super obligations at the same time,” says Trpcevski.

Changing cash-flow dynamics

Trpcevski says the reform will force many businesses to rethink how they manage working capital.

“It will certainly force a change in how businesses manage cash flow,” he says. “In some cases, the shift may even create new financing dynamics. I can see where second or third tier lenders may see a product opportunity to fund super commitments.”

More broadly, he says Payday Super could alter the timing of financial distress for some businesses. “It will present as a trigger for directors to make an appointment.”

Earlier regulatory visibility

Another major change is the increased visibility the ATO will have over super payments. With contributions moving into the regular payroll cycle, the ATO will gain far earlier insight into missed or delayed payments, reducing the lag between financial stress emerging and regulatory pressure being applied.

Trpcevski says it remains to be seen exactly how the regulator will approach enforcement under the new regime. “It will be interesting to see their approach unfold,” he says. “But I suspect the heightened collection activity we’re already seeing will continue.”

For directors, unpaid super carries significant consequences. Outstanding superannuation can trigger Director Penalty Notices (DPNs), potentially making directors personally liable for the debt.

As Trpcevski notes, the increased visibility also gives the ATO additional leverage.

“If super isn’t paid nor lodged within three months, directors are already on the hook,” he says. “It provides the ATO with another mechanism to put pressure on the company.”

A trigger for earlier restructuring

The reforms may also influence how and when businesses seek restructuring advice.

For example, companies entering Small Business Restructuring (SBR) must have employee entitlements – including superannuation – fully up to date before commencing the process.

Trpcevski says Payday Super could become another early pressure point. “It will be another precursor event,” he says. “Part of the SBR process requires all outstanding entitlements including superannuation to be paid prior to engaging in the process.”

Insolvency practitioners often see a rise in voluntary administration and liquidation appointments around the time quarterly superannuation payments fall due, as businesses that have deferred obligations are forced to confront their true cash-flow position. “Under the new regime, some businesses may be forced to confront financial stress sooner than they otherwise might have,” Trpcevski says.

He adds that the changes should also prompt earlier engagement between businesses and their advisers. “Advisers have a critical role to play in helping businesses prepare for Payday Super. That means stress-testing cash-flow forecasts and identifying businesses where superannuation has effectively been funding working capital. In many cases, it should trigger earlier conversations about solvency rather than waiting until formal insolvency becomes unavoidable,” he says.