We are a month into Payday Super, and the transition from the old system to the new still has a few wrinkles. Some issues are new; some are long-standing misconceptions. So we sat down and spoke with Michael Fox, an accountant, tax expert, and Reckon Partner who owns and operates his own accounting firm and Melbourne gallery that specialises in the arts industry.
In his experience, the arts industry highlights the biggest challenges of paying super when pay schedules are irregular, relationships between contractors and employees are blurred, and interpreting the ATO’s guidance is buried in jargon. However, Fox’s guidance on Payday Super rings true across industries.
Interview has been edited for length and clarity.
Michael Fox, Principal of Michael Fox Arts Accountant and Valuer, at his Collingwood practice and art gallery.
Contractor or employee: Knowing who gets paid super
Super contributions are part of your obligations as an employer. But when it comes to contractors and sole traders, not every business has a clear understanding of who is entitled to super.
The guidance from the ATO changed in 2025 regarding who is entitled to super for sole traders, freelancers, and contractors. While this is established, awareness has yet to catch up. Fox explains that you need to distinguish between employees and contractors.
“Make sure you properly classify everyone you engage with,” he says. “Understand whether they’re an employee — that should be pretty clear — or a contractor with an ongoing, effectively labour-hire, arrangement.”
Given how often super needs to be paid now, the issue of who is owed super becomes more pressing. Make sure you understand who is entitled to super before work starts.
Payday Super best practice: Onboarding new employees
Payday Super expedites the timeframe for paying contributions: SGs must land in their super funds within 7 business days of paying qualifying earnings (unless an exception applies). This new method can expose businesses with more informal approaches to paying employees — a problem more about process than compliance.
“You pay someone promptly because you want to, but they haven’t filled out their paperwork,” explains Fox. “For example, they haven’t completed a TFN declaration or a Super Choice form. That means the super can’t be paid, because you can’t even put them onto your payroll system — and then all of a sudden, seven days go by, and you’re up for at least a $20 shortfall penalty with the ATO.”
To make sure you’re above board with super, you need an employee onboarding protocol that keeps you compliant and ensures staff do their due diligence as well. It’s essential for new hires to provide relevant information; not all the burden is on the employer here. Employee management software, like Reckon Mate, can help get this information organised, like contact details, TFN, super funds, and employment type, before the first paycheck.
Pay frequency: 52 chances to cop a penalty
The biggest catch-out for Payday Super is the requirement to make super contributions every pay cycle. The short compliance window, combined with increased pay frequency, significantly increases your chances of copping a penalty if you’re not careful, warns Fox.
“If you’re paying everyone every week, that’s probably not a great idea going forward,” he explains, “because if you miss a super deadline, you might get penalised 52 times. If it’s every fortnight, it’s 26. Still a lot. So maybe look at doing it 12 times a year, not 52.”
In addition to automating the payroll process with your payroll software, increasing the time between pay periods can serve as a safeguard against admin errors that could incur penalties from the ATO, like the superannuation guarantee charge (SGC).
Cash flow problems: Running out of cash on payday
Another sticking point for Payday Super is how you fund your new obligations. Under the old convention, businesses had three months to come up with the funds to pay super contributions. Now? Payday Super makes SG payments in line with salary and wages, meaning you need the working capital to pay the same super in more frequent, smaller instalments.
“One of the big issues with Payday Super is just the cash flow,” Fox explains, “because previously you had three months before you had to pay your super guarantee, and now it’s every seven days. That’s a big deal.”
This is where cash flow forecasting is essential. Calculate what cash you’ll need in advance so that you aren’t caught out with insufficient funds at payday.
Going it on your own: Operating without advice
The right advice goes a long way when navigating the ATO’s guidance and government legislation. “There are a lot of very particular rules when it comes to the taxation of the arts,” Fox says. “And the Tax Office isn’t letting anyone know about them — it’s so buried in their websites.”
On top of that, Payday Super adds another layer to the process of running a business — one that adds a timer to your obligations. Under Payday Super, Fox sees echoes of how GST was introduced back in the day.
“In the first year of GST, the government received so much money because everyone just wanted to comply,” he remembers, “and then people figured it out, and the GST revenue went down.”
“The introduction of Payday Super is a little like that. People are trying to pay all the super, but they might be paying more than they need to.”
With the new rules in force, the ATO has mentioned leniency in the first year of the rollout, but businesses shouldn’t treat that as a guarantee. This is where having an accountant, like Fox, can protect businesses from making mistakes and copping penalties from the ATO.
“It’s like everything in life — it’s cost-benefit, isn’t it? What an accountant would cost you per year, compared to potential penalties with the ATO,” he debates. “The penalties can be really steep — and also, most likely, you’re paying more tax than you need to.”
So don’t go it alone with Payday Super: speak with your accountant or bookkeeper to get the right advice for your business.
About Michael Fox, Arts Accountant
Michael Fox is the principal of Michael Fox Arts Accounts and Valuer, where he assists artists and their businesses with their accounting needs. Fox is also a tax specialist with a master’s in tax from Melbourne Law School and has experience consulting on tax policy for nonprofit organisations and state and federal governments.
Outside his accounting firm, Fox is an avid art enthusiast and always looks to promote and champion Australian art at his own gallery, Fox Galleries. On August 22, Fox Galleries will host well-known Australian artist Victor Rubin’s collective works in the exhibition Archive. For more information and contact details, head to his website.
Michael Fox, Principal of Michael Fox Arts Accountant and Valuer, and Director of Fox Galleries
