Superannuation: the overlooked obligations that can catch business owners out

For many businesses, superannuation is not as straightforward as it looks. Once you have contractors, apprentices, directors, family members, owner wages, allowances, bonuses or irregular payments, super can become much easier to get wrong.

And the rules are about to get tighter. From 1 July 2026, Payday Super will bring super much closer to payroll, giving businesses less time to identify and correct mistakes.

This means super needs to be reviewed before it becomes a problem. There’s more to consider than simply whether super has been paid. It is whether it has been paid for the right people, on the right earnings, and at the right time.

Start with who you need to pay super for

The first issue for any business is working out who is entitled to super.

For straightforward employees, this may seem simple. But many SMEs do not have a simple workforce. A trade business, for example, may have full-time employees, apprentices, casual staff, subcontractors, family members helping in the business and a director who also takes wages.

Each arrangement needs to be considered properly.

Business owners should not assume super only applies to “normal” employees. In some cases, contractors may also be covered by super guarantee rules. Employers are responsible for working out whether they have to pay super for their workers, and this can include some contractors depending on the arrangement.

This is where many businesses can get caught out. Calling someone a contractor, asking for an ABN, or paying them by invoice does not automatically mean there is no super obligation.

The real question is whether the working arrangement creates a super guarantee obligation.

Contractor payments need particular care

Contractors are one of the areas where super can catch business owners off guard.

Many SMEs assume that if someone has an ABN and sends an invoice, they are outside the super system. That is not always correct. As we covered in our guide to employee vs contractor arrangements, having an ABN or issuing an invoice does not automatically mean someone is a genuine contractor. In some cases, a contractor may still be treated as an employee for super guarantee purposes.

This is especially relevant for trades, construction, labour hire and project-based businesses that regularly use subcontractors.

Under Payday Super, the timing issue becomes more important. The ATO has released guidance on payment deadlines under Payday Super, including how certain payments made outside the usual payroll cycle may be treated.

Based on the draft out-of-cycle payment guidance discussed in the tax profession, payments to contractors caught under the super guarantee system are not expected to receive the same extended out-of-cycle payment treatment. In practical terms, where a contractor payment creates a super obligation, the business may need to treat the date the contractor is paid as the trigger for the 7-business-day payment window.

That makes contractor reviews an important step before 1 July 2026.

The issue is not just whether someone is labelled as a contractor. The issue is whether the business has a super obligation for that worker.

Owner-employees can also be part of the picture

Super can also be misunderstood when it comes to business owners.

A sole trader taking drawings from the business is different from a company director who is paid wages through a company. If you operate through a company and pay yourself as an employee, super may need to be considered in the same way it would be for other employees.

This can also apply where family members work in the business and are paid wages.

For example, a small business may employ a spouse, adult child or other family member. If they are genuinely working in the business and being paid through payroll, their super treatment should be reviewed rather than assumed.

This is particularly important for businesses with more complex structures, including companies, trusts, related entities or family-run operations.

Business owners should ask:

• Am I taking wages, drawings or both?
• Are directors being paid through payroll?
• Are family members being treated correctly?
• Are all workers classified properly?
• Has the payroll system been set up to calculate super on the right payments?

These questions matter now, but they will become even more important once we move to Payday Super.

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The earnings you calculate super on are changing

From 1 July 2026, employers will shift from calculating super based on ordinary time earnings to using qualifying earnings under Payday Super.

Qualifying earnings are the payments that super must be calculated on under the new system. This matters because payroll is not always made up of straightforward wages. Many businesses pay staff through a mix of ordinary hours, overtime, allowances, commissions, bonuses, leave payments, back payments and other irregular amounts.

Under the current system, employers generally calculate super on ordinary time earnings. Under Payday Super, the calculation base will change. All employers will use qualifying earnings to calculate both the super guarantee amount and the super guarantee charge from 1 July 2026.

For many businesses, this means payroll categories will need to be reviewed. The practical question is whether each payment type in your payroll system is being treated correctly for super purposes.

For example, the ATO has confirmed that all commissions will be qualifying earnings under Payday Super, including commissions for work performed entirely outside ordinary hours.

This is especially important for SMEs that pay allowances, bonuses, commissions, loadings, back payments, advance payments, overtime or other irregular amounts. For tradies and project-based businesses, this may include site allowances, tool allowances, travel-related payments, labour loadings or payments made outside the usual pay run.

Before the new rules start, it’s important to review payroll categories and check which payments are currently set up to attract super. Any categories that are unclear, manually calculated or treated differently across employees should be reviewed with an accountant or payroll adviser.

If payroll categories are not coded correctly, super may be calculated incorrectly. That risk becomes more significant once Payday Super begins, because businesses will have less time to identify and correct mistakes before super is due.

Out-of-cycle payments need a clear process

Not every payment happens on a normal payday. A business might pay a bonus after a strong month, make a back payment after correcting an underpayment, pay a commission outside the normal payroll cycle, or process an allowance separately. These are often described as out-of-cycle payments.

Under the Payday Super framework, some out-of-cycle payments may have different timing rules. The ATO’s payment deadline guidance confirms that the Commissioner can determine which qualifying earnings are treated as out-of-cycle and what criteria apply.

It’s important that your payroll team knows which payments are part of the normal pay cycle and which payments are not. This cannot be left to guesswork.

If a payment qualifies for extended timing, the business needs to understand why. If it does not, the standard Payday Super timing may apply.

This is particularly important because payments to contractors are not expected to receive special out-of-cycle treatment under the draft approach. For businesses that regularly pay subcontractors, this should be built into the payroll and accounts payable process.

High-income earners with multiple employers

There is also a separate issue for some high-income earners who have more than one employer. This may apply where a person is employed by more than one business, or where a business owner draws wages from their own company while also being employed elsewhere.

The issue is that each employer has its own super guarantee obligations. If a person earns a high income from more than one employer, the compulsory super contributions from those employers may push them over their concessional contributions cap.

For example, this could apply to:

• a business owner who pays themselves wages from their company while also working in a senior role elsewhere
• a professional who works part-time across two businesses
• an employee who receives director fees or wages from a related entity
• someone who receives salary from multiple entities within a family or business group

Where this happens, the employee may be able to apply for a super guarantee opt-out for one or more employers. This does not remove the need for super altogether. The employee must still have at least one employer making super guarantee contributions.

If the exemption is approved, the nominated employer does not have to make compulsory super guarantee contributions for the covered period. In some cases, the employee may then negotiate to receive additional wages or salary instead of those super contributions. This can help prevent excess concessional contributions while allowing the employee to receive the value in another form.

For example, if a business owner is already receiving enough compulsory super through one employer to approach their concessional cap, they may apply for an exemption for their own company. If approved, their company may be able to pay the equivalent amount as wages instead of super, depending on the employment arrangement.

This is not relevant to every business, but it can be relevant for business owners, senior employees, professionals or people who receive wages from more than one entity.

Where it applies, the process needs to be handled carefully. It is not something an employer can simply decide on their own. The employee must apply through the appropriate process, and the employer needs to have the correct exemption certificate in place before changing how super is paid.

Payday Super reduces the margin for error

Under the current quarterly system, businesses have more time to identify and correct issues before payment is due. From 1 July 2026, the timeframe will be much tighter, with contributions generally needing to reach the employee’s super fund within 7 business days of payday. 

That means errors in employee details, fund information, payroll categories or worker classification can cause problems much faster.

It also means businesses will need to manage cash flow differently.

Instead of holding super until the end of the quarter, super will need to move much closer to wages. For businesses that already experience tight cash flow, this is something to plan for early.

What you should review now

Before Payday Super starts, business owners should review their super processes from end to end.

This includes checking:

• who is being paid through the business
• whether any contractors create super obligations
• whether owner-employees are being treated correctly
• whether family members working in the business are set up properly
• which earnings super is being calculated on
• how allowances, bonuses, commissions and back payments are coded
• whether employee super fund details are current
• how long the clearing house or payment process takes
• whether cash flow planning needs to change

For some businesses, this will be a simple payroll review. For others, particularly those with subcontractors, multiple entities, irregular payments or owner wages, it may require a closer  look.

Super is becoming a live payroll issue

Superannuation is no longer something you can afford to treat as a quarterly admin task.

The rules already require businesses to understand who they need to pay super for and which earnings super applies to. Payday Super adds another layer by tightening the timing.

For business owners, the best step is to review the setup before the new rules begin. The right approach will depend on your business structure, payroll setup and worker arrangements.

If you are unsure whether your payroll, contractor arrangements or super processes are set up correctly, Bonerath & Co. can help. Get in touch with our team to review your current arrangements and make sure your business is ready before Payday Super starts.

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