The End of the Late Payment Offset

Introduction

The introduction of Payday Super will fundamentally change how and when employers must pay superannuation. One important consequence of this major reform is the removal of the late payment offset (LPO), a feature employers have relied on under the current quarterly superannuation system.

What is the LPO?

Under the existing rules, if an employer makes a superannuation payment to an employee’s fund after the due date, they may elect to apply that payment as a LPO in their SGC statement. This reduces the SGC by the amount already paid, although interest and administration fees generally remain payable with late payments denied as a tax deduction.

The LPO was designed to operate within a quarterly compliance system. Its purpose is to:

• avoid employers being charged twice for the same super amount;
• encourage voluntary correction of late super payments; and
• recognise that employees ultimately received their super, even if it is received late.

LPO will end on commencement of Payday Super

From 1 July 2026, Australia will move to Payday Super, requiring employers to pay super at the same time as wages. As we know, each payday will create a new superannuation obligation with contributions needing to reach the employee’s fund within 7 calendar days of payday or the SGC will apply.

The ATO has confirmed the final quarter in which employers can use the LPO is 31 March 2026. Superannuation for that quarter is due on 28 April 2026, with late payments made up to 30 June 2026 still claimable as a LPO when lodging the SGC statement for that quarter.

However, when Payday Super commences, employers will no longer be able to elect to offset late super payments against an SGC liability. Under the new law, late payments will be automatically applied to the oldest outstanding superannuation liability as opposed to being allocated at the employer’s choice.

What will happen to late payments instead?

Although the LPO is being removed, late superannuation payments are not ignored entirely. As a built-in feature of Payday Super:

• super contributions paid before the ATO issues an SGC assessment will reduce the final super shortfall;
• this reduction occurs automatically as part of the SGC calculation; and
• interest and other SGC components may still apply.

Removal of the LPO marks a clear shift to real time superannuation compliance. Superannuation will need to be treated much like wages with fewer opportunities to correct mistakes. The ATO has encouraged employers to ensure they have no outstanding SG liabilities at 30 June 2026.

Final thoughts

The LPO has been a familiar feature of Australia’s superannuation system but will end with the commencement of Payday Super on 1 July 2026. Key upcoming LPO transition dates to monitor include:

Payday Super will place greater emphasis on timely and accurate superannuation payments. If you need help with understanding these changes, preparing your payroll systems or reviewing your cash flow and compliance processes, contact your local Moore Australia office today.