The introduction of the Payday Super regime will not restrict the ability of SMSF members to implement a contribution reserving strategy, Jason Hurst writes.

With the commencement of the Payday super rules on 1 July 2026 fast approaching, a common question from practitioners of late has been how these new rules will interact with an SMSF’s ability to use a reserving strategy in respect of employer contributions. This article outlines the steps that need to be taken to ensure the outcomes for the employer, employee, member and the fund occur as intended.

Background

A popular strategy used by some SMSF members is referred to as a contribution reserving strategy. The premise of this strategy is to make a contribution in one income year, but for it to count against the member’s contribution cap in the following financial year. In relation to concessional contributions, this strategy can allow for a ‘double deduction’ in year one, effectively bringing forward a deduction from year two to year one.

This strategy is more commonly used in cases where an SMSF member might have lumpy income in year one, for example a capital gain, or they will have lower income in year two, for example they are retiring on or soon after 30 June or significantly reducing their work hours.

The contribution reserving strategy is particular to members of an SMSF as trustees can allocate contributions within 28 days following the end of the month in which the contribution has been received. This is unlike Australian Prudential Regulation Authority (APRA)-regulated superannuation fund trustees, industry and retail super funds, who must allocate contributions no later than three business days from when the contribution was received.

Commencement of Payday Super

From 1 July 2026 Payday Super requires employers to calculate and pay superannuation guarantee (SG) amounts each payday, instead of quarterly, and ensure contributions are received by employees’ super funds within seven business days of their payday.

During the July 2026 changeover employers will need to ensure their SG liabilities for the April to June 2026 quarter are met and begin to meet their Payday super obligations for pay periods that fall on or after 1 July 2026.

The transitional period of 1 July 2026 to 28 July 2026 will be particularly challenging as contributions received in this period will be automatically allocated back to the employer’s prior quarter’s SG liability unless that impost is extinguished in full.

In most cases employers must process SG contributions electronically using a Superstream compliant clearing house. SMSFs receiving employer contributions from an unrelated employer need an electronic service address (ESA) and a bank account that can process and receive payments using a new payment platform (NPP) technology. Employers will also be able to make Member Verification Requests (MVR) to confirm the super fund details given to them by employees are correct. SMSF trustees should confirm their fund bank accounts are NPP compliant and they have systems in place to action MVR requests within four hours. MVR capability should be confirmed with the SMSFs ESA provider.

Example

Jill and Jack are members and trustees of the JJ Superannuation Fund, an SMSF. Jack is employed by Hill Waterworks Pty Ltd. Jack has a salary sacrifice agreement in place under which his performance bonuses, determined in January and June each year, are paid by his employer as super contributions to his SMSF. Based on Jack’s current base salary his employer is also required to make SG contributions of $3000 per quarter for financial year 2025/26.

In January 2026, Jack’s employer awards him a $21,000 bonus and as requested pays that amount as a super contribution to Jack’s SMSF. As trustees, Jack and Jill allocate $21,000 to Jack’s interest in the fund when it is received.

On 20 June 2026, Jack’s employer awards him a $15,000 bonus and pays that amount as a superannuation contribution to Jack’s SMSF as requested. To prepare for the Payday super changes Jack’s employer also decides that rather than wait until the 28 July 2026 deadline they will make Jack’s April to June 2026 SG contribution in June 2026. Both the $3000 SG contribution and the $15,000 bonus contribution are received by the SMSF on 23rd June 2026.

As trustees, Jack and Jill have planned how to manage this amount to ensure Jack does not exceed his concessional contributions cap in 2025/26 (Jack is ineligible to use the catch-up concessional contribution cap rule). They decide to delay allocation of both June contributions and document this decision. On 30 June 2026, $18,000 is accounted for as ‘unallocated contributions’ in accordance with the SMSF’s trust deed. On 5 July 2026, Jack and Jill then resolve to allocate the $18,000 in total contributions to Jack, bringing its allocation into the 2026/27 financial year.

By implementing this strategy, Jack gets the advantage of moving assessable income from his personal marginal tax rate of 32 per cent to a lower tax of 15 per cent in respect of his bonus. Furthermore, the fund allocates the contributions over two financial years, ensuring Jack does not breach the concessional cap for either financial year as $18,000 of the total $48,000 will be counted against Jack’s 2026/27 concessional contribution cap, which will be $32,500.

For the SMSF the total amount of $48,000 is recorded as assessable contributions in the 2025/26 income year and must be included in that financial year’s annual return.

The decision to leave the June contributions unallocated has no impact on Jack’s employer. For tax deductibility and SG purposes the contributions would be considered made when the SMSF receives these June amounts, that is, the full $48,000 including the $18,000 in June should be deductible to Jack’s employer in the 2025/26 financial year.

Interaction between a reserved SG contribution and Payday Super

The exact interaction between a June 2026 employer contribution reserving strategy and the Payday Super rules are as follows:

1. The contribution and implications for the SMSF

The 28-day allocation rule remains intact. Under the Payday Super regulations APRA-regulated funds will see their allocation deadlines reduced to three business days. However, SMSFs maintain their existing ability for trustees to be able to allocate contributions up to 28 days after the end of the month in which the contribution was received.

This is particularly relevant for June 2026 strategy execution. Because an SMSF still has 28 days post the end of the month to allocate a contribution, a trustee can still execute a contribution reserving strategy in June 2026 and future financial years. The monies can remain unallocated on 30 June 2026 and then be allocated to the member in July 2026 but no later than 28 July 2026 the 2026/27 financial year.

2. Concessional contribution cap implications

For SMSFs that use this strategy, trustees should prepare documentation confirming the pre-determined decision to leave June 2026 contributions unallocated and a post 30 June 2026 resolution to allocate the contribution.

The Request to adjust concessional contributions (NAT 74851) should be prepared and provided to the ATO either at the time the SMSF return is lodged or before. This form is the mechanism to ask the regulator to allocate the reserved contribution to the 2026/27 financial year for contribution cap purposes only.

Practitioners should keep a close eye on this process and, as the SMSF return and the NAT 74851 may be processed by different ATO teams, there may be cases where an excess concessional contribution notice may accidently issue. In these cases, practitioners or trustees will need to contact the regulator and request the NAT 74851 is processed immediately.

3. Employer implications

A contribution is currently considered made by an employer when it is received by the employee’s superannuation fund. From 1 July 2026 the Payday Super rules include an even clearer ‘able to be allocated definition’.

In our example the contributions made in June 2026 by Jack’s employer are received by his SMSF on 23 June 2026. It would be this date his employer can record as the contribution date and their SG liability for Jack for the final quarter of the 2025/26 income year will be extinguished from this date. The fact the SMSF does not allocate this contribution to Jack until July 2026 has no impact on the employer.

This will also apply to the period of June and July 2027 when the Payday Super rules are fully operational, that is, June 2027 employer contributions will be allocated at the time the SMSF receives them for the purposes of meeting the employers SG liabilities. If these June 2027 contributions are reserved until July 2027 they will still be treated for both tax deductibility and Payday Super purposes as being made on the day the SMSF first receives the amount.

Summary

While there are a lot of moving parts here the contribution reserving strategy can add great value to SMSF members in the right circumstances. The introduction of Payday Super adds an extra level of compliance for employers however when considering this strategy, it should be business as usual for SMSFs and subject to following the current practice where funds can leave June concessional contributions unallocated until July for contribution cap purposes.

It is always important to consider the following financial year when implementing this strategy. In our example Jack will have used $18,000 of his 2026/27 concessional cap which will need to be considered.

This strategy can provide great benefits when the contributions for the following financial year are expected to be lower, for example leading up to retirement, in the case where the employee has reduced hours, or where a capital gain has occurred in year one.