Too Much SG Superannuation in 2026/27 financial year due to PayDay Super?

6 November 2026

From 1 July 2026, the PayDay Super Regime requires employers to make their 12% superannuation contributions for an employee at the same time as they pay the employee’s salary or wages (or within 7 days of payment).  Previously, employers were required to pay such contributions quarterly in arrears – payment being within 28 days of the relevant quarter end.

For the 2026/27 financial year it is possible that 15 months’ worth of employer 12% superannuation contributions will be received in that financial year as the June quarter 2026 contribution will be paid in July 2026 together with the normal 12% superannuation contribution for 2026/27.   If the employee is making personal concessional superannuation contributions, this may cause the employee to exceed the $32,500 concessional contributions cap applicable to the 2026/27 financial year.

To avoid this outcome (and to avoid having to deal with many, many, requests to the ATO from affected employees to have all or part of the June 2026 quarter employer contributions reallocated or discarded under the discretion conferred on the Commissioner of Taxation under s291-465 of the Income Tax Assessment Act 1997), the June 2026 quarter contribution will be disregarded if it causes the employee to exceed the $32,500 cap.

Example One

During the 2026/27 financial year, the employer makes $12,000 of SG contributions for an employee, and the employee also contributes $20,500 of personal contributions which will be claimed as tax deduction.  Consequently, the employee will have $32,500 of concessional contributions for the 2026/27 financial year.

However, as the employer’s June 2026 quarter contribution of $3,000 is paid in early July 2026, the employee will then have $35,500 of concessional contributions for the 2026/27 financial year.

Without this amendment, the employee would have excess concessional contributions of $3,000 for the 2026/27 financial year. 

With this amendment, the $3,000 of excess concessional contributions will be treated as arising solely from the June 2026 SG contributions and the employee will have no excess concessional contributions for 2026/27 financial year.

Example Two

Consider the same facts as Example One with the employee making $18,000 of personal contributions (which the employee intends to fully claim as a tax deduction).

In this Example, the employee will have $33,000 concessional contributions for 2026/27.  Consequently, the excess concessional contribution amount is $500. 

As the excess amount is only $500 and it arose entirely from the employer’s June 2026 quarter contributions, only $500 of the $3,000 quarterly contribution will be disregarded.

Example Three

During the 2026/27 financial year, the employer makes $12,000 of SG contributions for an employee, and the employee also contributes $30,000 of personal contributions which will be claimed as a tax deduction, then the employee will have $42,000 of concessional contributions for the 2026/27 financial year.

However, as the employer’s June 2026 quarter contribution of $3,000 is paid in early July 2026, the employee will then have $45,000 of concessional contributions for the 2026/27 financial year.

The proposed amendment will ensure that the entire $3,000 SG contribution in respect of the 2025/26 financial year will be disregarded.  This will reduce the employee’s concessional contributions to $42,000.

When determining whether the June 2026 quarter contributions contributed to the excess concessional contribution, the general concessional contribution cap (which is $32,500 for the 2026/27 financial year) is applied and not the employee’s personal concessional contribution cap.

If the employee had a carry forward concessional contribution cap space of $16,000, then the employee’s personal concessional cap space will be $48,500 for 2026/27 financial year. 

Consequently, the employee will have no excess concessional contributions and will have carried forward a cap space of $6,500 for the next financial year (subject to the five year carry forward of unused concessional contribution cap space and the employee’s total superannuation balance at 30 June 2027 being less than $300,000).

If, however, the carry forward concessional contribution cap space was $7,000 rather than $16,000 (and all other facts being unchanged), then the outcome would be:

    • the SG contribution in respect of 2025/26 quarter of $3,000 would still be disregarded;
    • After disregarding the SG Contribution for the June 2026 quarter, the concessional contributions of the employee would be $42,000 ($12,000 employer and $30,000 employee);
    • the personal excess contributions cap of the employee is $39,500 (being the standard cap of $32,500 plus the carried forward excess cap of $7,000);
    • the excess amount would be $2,500 ($42,000 less $39,500 – being the employee’s personal concessional contributions cap).

For further information, please do not hesitate to contact our helpdesk on 02 8296 6266 or email info@supercentral.com.au.

 

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