Concessional contributions cap
The concessional contributions cap is the maximum amount of superannuation that can be contributed in a year and receive concessional tax treatment. In 2026/27, the cap is $32,500.
What is the problem?
The new requirement from 1 July 2026 to pay superannuation within seven days of pay day caused an issue for employees entitled to superannuation equal to the concessional contributions cap.
Under the old rules, superannuation needed to be paid within 28 days of the end of each quarter. Therefore, in the 2026/27 year, employees could receive superannuation for the quarter ended 30 June 2026, as well as all their superannuation for the 2026/27 year – i.e. 15 months of superannuation all within the one year. This could result in employees exceeding the concessional contribution amount of $32,500 in 2026/27.
What is the fix?
The proposed legislation has the effect of treating contributions relating to the June 2026 quarter paid between 1 July 2026 and 28 July 2026 as concessional contributions (if they are within the quarterly cap for that period, or were payable under certain industrial instruments), as well as treating up to $32,500 related to the 2026/27 year as concessional contributions.
Note: Late payments
Any late payments for the June 2026 quarter must be paid to the ATO via lodgement of a Superannuation Guarantee Charge Statement, and no ‘late payment offsets’ are available for this quarter.
What problems remain?
Salary sacrifice arrangements are excluded from the transitional rules. Employees who would otherwise receive less than the maximum concessional contribution amount and salary sacrifice for additional superannuation up to the cap, may find themselves paying extra tax in their superannuation funds if they don’t take action to reduce their salary sacrifice amounts in 2026/27. Essentially, these employees are prevented from accessing their full concessional cap for 2025/26, unless their employers happened to pay all their superannuation for that year before 30 June 2026.
This leads to another unresolved problem – to the extent any employers moved to Payday Super early, they may have triggered the excess contributions issue in 2025/26. This is not addressed by the draft legislation.
What should employees and employers do?
Employees who are salary sacrificing for additional superannuation should seek independent advice regarding the impact of Payday Super on their arrangements.
Employers who implemented Payday Super early may need to investigate options where concessional caps have been breached.
All employers should ensure they are up to date with their obligations. If any late payments have not yet been disclosed to the ATO, we recommend this be done as a priority. ATO reviews are common, and the costs of delaying can be high – for employer organisations, and their Directors.
We’re here to help
Grant Thornton’s highly experienced Employment Solutions team can help navigate these changes. For further information or assistance, please reach out to our expert team.
