NPP not suitable as the primary payment system for payday super

Payday super, coming into effect 1 July 2026 pending the current draft legislation, could bring a world of problems once introduced, including payroll and tax obligations for Australian small and medium enterprises (SMEs), experts claimed.

One of the proposed changes is to use the New Payment Platform (NPP) as the payment mechanism to facilitate faster and eliminate problems associated with super payments.

"The SuperStream data and payment standards will be revised to allow payments via the New Payments Platform and improve error messaging to ensure employers and intermediaries can quickly address errors," the Treasury fact sheet stated.

This however contrasts with the Reserve Bank of Australia's (RBA) recent risk assessment report, stating that the suitability of NPP for business-to-business (B2B) payments has not been properly assessed yet.

Gateway Network Governance Body chief executive Michelle Bower said there are clear indications that the system is not yet viable to be used as the only B2B payment system.

"As the RBA pointed out in their recent risk assessment report, the suitability of NPP for business-to-business payments hasn't even been properly assessed yet," Bower said.

"For super payments, we know there are existing gaps in functionality when comparing the NPP to existing payment rails.

"There is much work to be done before we can even make a sensible assessment of the NPP - or alternatives - to ensure super payments can continue to be efficient, cost effective and reliable."

The introduction of NPP is in response to the decommissioning the current Bulk Electronic Clearing System (BECS), but many other nations run at least two payment rails - one real-time and one batch-based.

The RBA suggested that the NPP had been "inadequately vetted" for the suitability of B2B payments, Bower added, claiming that there should be more competition in the payment infrastructure space.

"The super ecosystem is vast, with millions of participants, and we need to assess any changes to payment systems from each of those perspectives in a balanced, independent manner," Bower said.

"Policy makers should urgently consider allowing the NPP more time to mature and develop sustainable solutions to the issues that the RBA has highlighted, before requiring its inclusion."

Meanwhile, Australian SMEs are also set to face cash flow issues with payday super, as well as a slew of other payroll and tax changes.

Earlypay chief executive James Beeson warns SMEs must remain proactive to those changes.

From July 1, the superannuation guarantee (SG) rate will rise from 11.5% to 12%, increasing payroll costs for employers. Late payments will attract Superannuation Guarantee Charge (SGC), which is not tax-deductible.

Simultaneously, the Australian Taxation Office (ATO) will also remove the ability to claim deductions for General Interest Charge and Shortfall Interest Charge to discourage late tax liability payments.

Similarly, from 1 July 2026, alongside the introduction of payday super, the ATO clearing house will also be shut, forcing SMEs to seek alternatives like Xero or MYOB to process super payments.

SMEs, which includes a vast majority of financial services businesses, will need to adhere to the new rules despite existing burdens already in place.

"At a time when SMEs are already battling a tight labour market and rising operational costs, these changes will only add more pressure to their cash flow. Many businesses will need to rethink their finance strategies," Beeson said.

"SMEs need to act now to stay ahead of the changes and set themselves up for success."

Pointing out a solution, Beeson said businesses worried about navigating through the changes can use invoice financing to access funds for outstanding invoices.

"Invoice financing smooths cash flow, enabling businesses to pay staff, suppliers, and invest in growth - all without relying on their personal assets like the family home," Beeson said.

SMEs should also review budgets and payroll structures to account for increased SG rates and tax law shifts and ensure their payroll systems can handle "more frequent" super payments, Beeson suggested.