Late payment offset for employers will end soon

The ATO has reminded employers that the last time they can use the late payment offset (LPO) is for the quarter ending 31 March 2026.

Currently, employers who make a late super guarantee (SG) payment can lodge a super guarantee charge (SGC) statement and use the LPO to reduce their SGC liability by amounts paid late to a fund.

However, following the introduction of Payday Super this will no longer be available. The last time employers can use LPO is for the quarter ending 31 March 2026. Super for this quarter is due 28 April 2026 and an employer can claim LPO when lodging an SGC statement for any late payments made up to and including 30 June 2026.

On 1 July 2026, Payday Super starts and employers must then commence to  pay super for each payday. If there is a shortfall for the quarter ending 30 June 2026, SG payments made between 1-28 July 2026 will first be used to reduce any shortfall before 1 July 2026 before any amount is applied against SG relating to  payments made on or after 1 July 2026. Under Payday Super, late payments will automatically be applied under the law to the earliest available qualifying earnings day.

SMSF trustees may receive calls from employers and must be ready with how to respond. SMSFs will also need to improve their software systems and records and will need to make sure they more closely monitor transactions as they must respond within three days if there is an error and a contribution must be returned.

The ATO is recommending businesses pay SG in full, on time and to the right fund, and not have any outstanding SG liability as of 30 June 2026.

Daniel Butler, director DBA Lawyers, told SMSF Adviser that this is perhaps the biggest change in superannuation for 30 years, particularly to the operational, infrastructure and practical aspects of super.

“There is a lot happening behind the scenes now so that, hopefully, software and digital services providers can deliver systems that work so that money and data can be transferred efficiently and correctly within a seven-business day time frame before we start Payday Super on 1 July 2026,” he said.

“Under the current regime, if you have a shortfall, you can make a late payment generally before you get an assessment. Businesses can make a late payment and lodge a shortfall statement which means they can offset an SG liability which is related to a quarter before 31 March 2026. It’s like getting in front of your liability.

“However, the amount paid first is allocated against the normal nominal interest component (which is currently calculated at a nominal 10 per cent p.a.), and any further amount goes towards the employer’s SG liability. This facility is effectively closing on 31 March.”

He said that in respect of the new system, if a payment is late, it’s a first in, first offset against the first qualifying earnings day.

“It’s going to be in the order of payday. So, for example, if your first payday for the year is 1 July, and you’re a couple of months down the track and accrue an SG liability from July 2026, you cannot be specific to say you want this applied for the current month, which is say, September. The Payday Super system will direct that payment first towards the employer’s July SG liability,” he said.

“In contrast, under the current rules, up to 31 March 2026 you can pay late, and direct which quarter it relates to. Let’s say if you paid late, and you have liabilities for prior quarters, some employers applied their contribution to the current quarter so they wouldn’t be late again. But you can’t do that under the new law commencing on 1 July. The new law says it’s first in, first out.”

Although there is a 28-day transitional period between 1 to 28 July 2026, Butler said there is a very real risk that there will be issues with employers who will possibly bunch up contributions.

“Let’s say you’re the employer, you’ve got a few employees, and you pay weekly. You should also pay SG on the same payday and you have seven business days for the super to be transferred via the software and digital service providers like clearing houses),” he said.

“You have this potential overlap where you’ve got an outstanding liability for 30 June 2026 for the last quarter or last pay period before 30 June 2026 (if less than a quarter), and then you have the new Payday Super system starting.

“We’re recommending very strongly that employers get all SG contributions for FY 2026 out of the way before 30 June, preferably before 20 June because if you don’t do it before the 20 June, a lot of the large funds close down the acceptance of contributions for the current financial year.”

He added that employers need to plan ahead and, prior to 20 June, get their contributions in and then roll over on 1 July so they have a “clean slate” when they go into the new system.

“Employers should be communicating with employees as there is also the potential for a bunching of contributions before 30 June 2026 and also a bunching impact in the next 2026-27 financial year,” he said.

“Previously the ATO has been reluctant to exercise its discretion to reallocate a contribution to another financial year or ignore a contribution unless special circumstances exist. 

“However, we are about to enter the ‘perfect storm’ where a lot of issues are going to arise as the Payday Super deadline and all the major changes being compressed into a small time frame with employers getting used to new systems which have yet to be tested and any gremlins resolved are about to hit the tarmac.”

Butler said he is aware of numerous professional and industry bodies who are concerned about these issues and the difficulty the vast majority of employers face and are seeking a transitional period to protect employers from the severe penalties and reputational damage of paying pay or SG late.

Keeli Cambourne

March 3 2026

smsfadviser.com