The End of Financial Year is fast approaching, and this year, it brings one of the biggest changes to payroll in recent history. We are now past the middle of May, which means the 1 July 2026 start date for Payday Super is just weeks away.
While many business owners have spent the last few months updating their payroll systems for their standard employees, there is one crucial group that often gets overlooked: independent contractors.
If your business engages independent contractors, the shift to Payday Super requires your immediate attention. Here is a breakdown of what you need to know to ensure a smooth transition.
Understanding when super applies to contractors
There is a common misconception that having an Australian Business Number or submitting an invoice automatically exempts a worker from receiving superannuation. Under Australian law, this is not always the case.
Some independent contractors are treated as employees for super purposes under the extended definition of employee. You will generally need to pay super for a contractor if they are paid mainly for their labour.
If you are paying a contractor primarily for their personal effort, skills, or time, rather than to deliver a specific result or outcome, super is likely required. This rule applies even if they:
– have an ABN
– invoice you for their work
– are explicitly described as a contractor in a written agreement
It is important to note that these eligibility rules currently apply and are not changing under Payday Super. If you are already required to pay super for an independent contractor, you will simply continue to do so.
The new payment timeline
While the eligibility rules remain the same, the timing of your payments is undergoing a massive shift. There is no separate timing or special treatment for independent contractors under the new legislation.
From 1 July 2026, superannuation for eligible independent contractors must be paid for each payday, and the funds must reach the contractor’s nominated super fund within seven business days after that payday.
For contractors, the definition of a payday is slightly different than for standard employees. If you are paying them by invoice, the payday is considered to be the date the invoice is paid. This means the super contribution must reach the clearing house and subsequently the super fund within seven business days of you paying that invoice.
Reporting for contractors
Your reporting obligations will depend on how you currently process your contractors.
If you are not currently reporting your contractors through Single Touch Payroll, you do not need to change this under the new Payday Super rules.
However, if you do currently report contractors under Single Touch Payroll, there is a new requirement. You will need to ensure that you report both their qualifying earnings and their super liability through the system from 1 July 2026 onwards.
Time to act
With the July deadline looming, now is the time to review your contractor arrangements. Take the time this week to assess your current roster of contractors and confirm exactly who is eligible for super based on the mainly for labour rule.
Once you have identified your eligible contractors, review your internal processes. You will need a reliable system to ensure that every time an invoice is paid, the corresponding super payment is triggered and hits the fund within that strict seven-day window.
If you are feeling overwhelmed by these upcoming changes, Nova Business Services is here to help. Visit our website to learn how we can streamline your payroll and ensure you are fully compliant before the new financial year begins.
Our team is here to support you and your business in many different ways, give us a call on 1800 668 225 or reply to this blog by clicking here to ask us any questions.
