Australian Payroll Compliance Update: What's Changing in 2026-2027

Several major compliance changes are coming into effect in 2026 and 2027. Understanding what's changing is the first step to preparing your business.

• Payday Super
  From 1 July 2026, employers must pay superannuation with each pay run rather than quarterly. Contributions must reach employee funds within seven business days.

• Income Tax Rate Reductions
  Tax rates for income between $18,201 and $45,000 will drop in two stages: to 15% on 1 July 2026, then to 14% on 1 July 2027. This affects all 14 million Australian taxpayers.

• Paid Parental Leave Expansion
  Government-funded PPL increases from 22 weeks to 24 weeks on 1 July 2026, then reaches 26 weeks on 1 July 2027.

• Enhanced ATO Monitoring
  The ATO received an additional $1 billion in funding from 2025-2029 to extend compliance activities, with increased focus on superannuation payments, payroll tax, and employee entitlements.

Payday Super is the most significant change for Australian businesses in 2026. The legislation received Royal Assent on 6 November 2025, making it law.

According to Industry Super Australia (ISA), approximately 2.5 million employees missed $4.3 billion in superannuation during 2019-20. Over a quarter of affected workers missed an average of $1,736 annually. Payday Super addresses this chronic underpayment problem by making super payments more frequent, visible, and easier for the ATO to monitor in real-time.

What's Changing

From 1 July 2026, employers will be required to:

• Pay superannuation at the same time as wages, rather than quarterly
• Ensure super contributions reach employee funds within seven business days of payday

This fundamentally changes how businesses manage cash flow. Quarterly super payments can no longer be used as short-term working capital. For businesses that run weekly or fortnightly payrolls, this creates a permanent shift in funding requirements.

What Employers Need to Know

• The Small Business Superannuation Clearing House will close fully from 1 July 2026
• STP Phase 2 reporting will expand to include Qualifying Earnings and superannuation liability per pay run
• The ATO will receive near-real-time visibility of late super payments
• Late payments will trigger Superannuation Guarantee Charges, penalties and interest automatically

What Happens If You're Not Ready

Superannuation Guarantee Charges apply automatically when contributions don't reach funds within seven business days. The ATO's real-time monitoring means non-compliance is detected immediately, and for multi-entity structures, ABN misalignment affects every entity simultaneously.

From 26 August 2025, the right to disconnect now applies to small businesses as well as large employers.

What's Changing

Employees can legally refuse unreasonable out-of-hours contact unless the communication is considered reasonable based on factors such as:

• Their role and level of responsibility
• Whether they are paid for being on call
• The urgency of the matter
• The disruption created
• Their personal and family circumstances

What Employers Need to Know

• Dispute resolution - Disagreements about reasonableness can be escalated to the Fair Work Commission for resolution
• Protected rights - Employers are prohibited from taking adverse action against employees who exercise their right to disconnect
• Policy requirements - Businesses need clear policies outlining expectations for after-hours communication and what constitutes reasonable contact
• Cultural shift - This changes expectations around availability, communication practices, and management behaviour outside standard working hours
• Contract updates - Employment contracts, performance expectations, and position descriptions may need updating to reflect the new framework

What Happens If You're Not Ready

Without clear policies, disputes about "reasonable" contact can escalate to the Fair Work Commission. Inconsistent application creates workplace tension and potential adverse action claims.

The government-funded Paid Parental Leave scheme continues its staged expansion.

What's Changing

• Currently: 22 weeks
• From 1 July 2026: 24 weeks
• From 1 July 2027: 26 weeks

Since 1 July 2025, the ATO also pays 12% superannuation on government-funded PPL, delivered as an annual lump sum to employees.

What Employers Need to Know

The expansion supports participation and retention, but it requires more deliberate workforce planning than many organisations currently apply to parental leave.

• Extended absence periods - Longer protected leave means more planning for workforce coverage and role backfill
• Policy alignment - Employer-funded parental leave policies should complement government PPL rather than duplicate it
• Workforce planning - Extended leave periods require more deliberate planning than many organisations currently apply to parental leave
• Return-to-work considerations - Businesses need enhanced programs to support parents returning after extended leave periods
• Flexible arrangements - The expansion supports shared parental responsibilities, requiring flexibility in how leave is taken and managed

What Happens If You're Not Ready

Extended leave periods without workforce planning stretch remaining teams thin and create coverage gaps. Poor return-to-work transitions affect retention and team morale.

Two legislated income tax cuts will take effect in consecutive years, impacting all 14 million Australian taxpayers. While employees benefit through increased take-home pay, employers and payroll teams must carefully manage system updates and compliance to avoid costly errors.

What's Changing

• Affected bracket: $18,201 – $45,000 (other brackets remain unchanged)
• Estimated impact: Average combined tax savings of ~$2,229 in 2026–27 and ~$2,548 in 2027–28
• From 1 July 2026: Tax rate drops from 16% → 15%
• From 1 July 2027: Tax rate drops from 15% → 14%

What Employers Need to Know

• Compliance obligations - PAYG withholding must be accurate for all employees each financial year to avoid ATO penalties
• System updates - Payroll software requires updates in both 2026 and 2027 to reflect the new tax rates
• Employee inquiries - Staff may have questions about how these changes affect their pay, so proactive communication is important
• Testing and verification - After each update, payroll calculations should be checked to ensure accuracy

What Happens If You're Not Ready

Incorrect PAYG withholding either reduces employee take-home pay or creates year-end tax debts—and you'll face this twice with consecutive updates in 2026 and 2027.

The Superannuation Guarantee rate reached 12% from 1 July 2025 and remains stable at 12% through 2026–27. While the percentage itself is no longer increasing, how and when superannuation must be paid changes dramatically under Payday Super.

What's Changing

From July 2026 onward:

• Super must be paid with every payroll cycle (not quarterly)
• Contributions must reach employee funds within seven business days
• Receipt timing becomes just as important as payment timing
• The ATO will apply a restructured SG Charge for late payments

What Employers Need to Know

• ABN alignment requirements - Superannuation submissions must align with the same ABN used in STP reporting. This affects businesses with multiple entities or centralised payroll structures
• Multi-entity impact - Models that rely on a single head-office ABN to process super for multiple entities will need restructuring
• Franchise operations - Franchises that manage super payments centrally under one ABN will face operational changes
• Real-time monitoring - The ATO will have visibility into whether contributions reach funds within the seven-day window

What Happens If You're Not Ready

ABN misalignment means every super payment across every entity fails compliance from day one. Centralised payroll models and franchise structures will need complete restructuring to meet requirements.

With all these changes coming, the advantage goes to businesses that start early. With proper preparation, you'll have time to configure systems correctly, test thoroughly, train your teams, and implement changes smoothly—well before the deadline pressure hits.

Australian businesses have always adapted to regulatory change, and these reforms are no different. Understanding what's coming, when it takes effect, and how to prepare puts you in control of the transition.

We’ve created a 2026-2027 Compliance Guide that gives you everything you need in one place, and breaks down what's coming and what you need to do so you can navigate these changes smoothly. 

Inside, you’ll find:

✓ Key compliance dates for 2026-2027 — Every critical deadline clearly outlined

✓ Detailed breakdowns of all five major changes — Payday Super, income tax reductions, superannuation changes, PPL expansion, and right to disconnect

✓ What employers need to know — Compliance requirements, system updates, and reporting changes for each reform

✓ Critical action checklists — What to do before 1 July 2026, from 1 July 2026 onwards, and preparing for 1 July 2027

And more. Download The Quick Guide to Payroll Compliance for 2026 now.