How Payday Super affects Total and Permanent Disability and Income Protection Insurance Cover

The introduction of ‘payday’ super represents one of the biggest changes to Australia’s superannuation system in recent years.  These reforms impact not only retirement savings, but also the insurance held within superannuation accounts.

For people who are injured and unable to work, it is important to understand how these changes may affect the continuity and administration of TPD insurance within your super, including any TPD and Income Protection cover.

What is Payday Super?

From 1 July 2026, the Federal Government will introduce legislative reforms which change the way in which employers are to report, calculate and pay compulsory superannuation contributions. 

Under the new reforms, employers are required to pay their employees’ superannuation guarantee at the same time as their regular wages so that it is received within seven business days of payday.  This is different from the current, soon to be old system, which required employees to be paid superannuation once every quarter.

Benefits of Payday Super

The payday super system aims to help Australians grow their super balance without making additional concessional contributions by simply increasing the frequency in which super is paid. 

Ensuring employers pay super with each pay cycle rather than quarterly, contributions have more opportunity to compound and increase in value over time.

The reforms also impose stricter reporting obligations on employers which makes it easier for employees to identify missed or late payments. 

To ensure compliance with the new rules, employers are also penalised for non-payment or underpayment of their employees’ superannuation.

How Payday Super affects Insurance Cover inside your Superannuation

Payday super also affects any insurances held within super.  Depending on your superannuation fund and the terms of your policy, your super contribution may be paying for additional insurances such as Total and Permanent Disability (TPD), Income Protection and Death Cover.

The premiums for these insurances are debited from your superannuation account along with any account maintenance fees.  You can find out whether you hold any insurance inside your super by checking your annual statement from your superfund. 

Under the current system, gaps in quarterly contribution payments put your super insurances at risk of lapsing or being cancelled due to inactivity or low account balances. In Australia, superannuation funds are required to close superannuation accounts with less than $6,000 where no contributions or rollovers have been received for at least 16 months.

The purpose of this is to protect accounts from fee erosion. When an account is closed, the remaining balance is transferred to the Australian Taxation Office (ATO) until it is claimed and transferred to an active super account.

Payday super makes it easier for employees to identify missed contributions and maintain continuous insurance cover within their superannuation accounts, which is important when it comes to making a TPD or Income Protection claim.

TPD and Income Protection claims can be delayed when there is uncertainty about whether insurance was active at the relevant time, particularly where super contributions have been paid late or gaps in cover need to be investigated. The stricter reporting obligations under the payday super system support a smoother and potentially faster claims process by improving the accuracy of super contribution recordkeeping. 

If you are unable to work due to injury or illness and hold insurance through super, the new payday super rules will help keep you protected when you need it most.