COSBOA warns payday super rollout risks chaos for small business

The Council of Small Business Organisations Australia (COSBOA) has urged the Federal Government to take a “realistic and pragmatic” approach to rolling out its Payday Super reforms, warning that the current timeline and compliance design could overwhelm small business owners and derail the good intentions behind the policy.

From 1 July 2026, employers will be required to ensure superannuation contributions reach their employees’ funds within seven calendar days of each pay cycle. Currently, most businesses have between five and ten business days to make those payments.

Payday Super: good idea bad timing

COSBOA Chair Matthew Addison says while small businesses support the idea of regular, transparent super payments, the plan is simply unworkable under the proposed timeframe.

“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.

Business not ready for changes

Addison says the systems needed to support Payday Super, from payroll software to super fund clearing houses, aren’t yet fit for purpose.

“We’re trying to build a complex new system on foundations that aren’t ready,” he 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 warns that rushing the rollout could lead to chaos, especially for small employers juggling payroll, compliance, and day-to-day business operations.

Payday Super: Three key fixes: time, cost, and fairness

COSBOA is calling for three major changes to make Payday Super workable for small business:

More time: A phased approach, with a shift to monthly super payments by 1 July 2026, and full Payday Super no earlier than 1 July 2030.

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

Cost support: COSBOA says small businesses shouldn’t be left to foot the bill for what is essentially national infrastructure. The Government’s own estimates put the average cost at $151 per employer per year, but Addison says that’s wildly unrealistic.

“The transition will bring new costs — higher software fees, more transactions, extra admin time. This is essential national infrastructure. Small businesses and the software developers who enable them should be supported to implement it.”

Fairer penalties: Under the draft laws, employers could face penalties even if delays are caused by super fund errors or clearing house bottlenecks. COSBOA says that’s unfair.

“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.”

Red tape creep

Addison also flagged that the ATO’s proposed Voluntary Disclosure Statement process, designed to help employers report and rectify errors, doesn’t integrate with payroll systems.

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

Despite the concerns, COSBOA says small businesses are not resisting reform, they just want a system that works in the real world.

“This is one of the biggest payroll changes in decades,” Addison said. “Small businesses want to get it right – but they need a clear, practical and achievable pathway to do so.”

He added that if implemented properly, Payday Super could be a “good reform built on solid foundations. Let’s take the time to build it properly,” he said.

The government has said it is open to consultation, but COSBOA is urging ministers to listen closely to what small business is saying before finalising the design. With only 20 months before the scheduled start date, time is ticking for both government and business to get the details right before Payday Super turns into an administrative headache.

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