Payday Super, cash flow holding back small businesses in 2026

Limited cash reserves, compliance changes, and uncertainty about EOFY investment decisions are the key and immediate issues facing SMEs, according to new findings.

New research from Prospa and YouGov reveals that 70 per cent of SMEs are confident in their projected cash flow over the next year, despite impending compliance, spending, and regulatory changes.

The impending Payday Super laws – which require employers to pay superannuation contributions at the same time as wages – are predicted to significantly impact small businesses, especially at a time of high inflation. Around four in 10 (41 per cent) lack a comprehensive understanding of the changes, 30 per cent are unaware of the reforms, and another 11 per cent are aware but do not hold a clear understanding.

Of those aware of the change, financial pressures are a major concern – 19 per cent are not prepared, and 14 per cent are unsure if they can meet the new payment schedule.

“For businesses with thin buffers, moving super payments forward compresses working capital. The risk is the rule itself; it’s being caught unprepared and being non-compliant,” Prospa’s co-founder and chief revenue officer, Beau Bertoli, said.

Overall, SMEs operate with an average of 2.7 months of expenses, already leaving little room for error before increased financial obligations are considered. And many operate on much smaller cash reserves – 42 per cent have two months of expense or less in reserve, 16 per cent with one month or less, and a shocking 14 per cent with no reserve.

Bertoli said: “Cash flow planning is going to be key for businesses. If you don’t have or can’t create the reserves to find this new change, it’s time to plan a funding line to support your cash flow through this change.”

Elise Ward, chief people officer at Prospa, highlighted the operational impact for small businesses, stating: “Paying super at the same time as wages means tighter cash flow management, more frequent payroll touchpoints, and far less room for error. For many small businesses, payroll is the single biggest and most frequent outgoing, so even small timing shifts can materially affect working capital.”

She added: “Errors that may have previously been caught and corrected before quarterly super payments will now surface immediately. That makes employee pay cycles, payroll systems and internal controls more critical than ever, not just for compliance, but for business confidence.”

The focus now, she stated, is on stress-testing and reviewing systems, being clear on ownership, and communicating with your team.

EOFY investment decisions, meanwhile, are slowing down. Despite the instant asset write-off up to $20,000 remaining available until 30 June 2026, only 18 per cent of SMEs plan to make use of it. In addition, almost a third are unsure, and nearly 5 per cent believe the scheme has already ended.

According to Bertoli, “businesses aren’t saying no to investment – they’re stuck deciding when and in what order. When cash is tight and obligations are moving faster, sequencing matters.”

Concerningly but not surprisingly, external funding is being increasingly relied on to manage overlapping financial pressures, with 34 per cent of SMEs expected to access external finance over the next year, up 3 per cent from September 2025.

The expected average amount that will be borrowed is $23,181.

For many SMEs this year, “it’s about staying liquid, compliant and flexible”, according to Bertoli, who said: “The businesses that plan early, model their cash flow properly and get advice will be in the strongest position to invest when the timing is right.”

And for Ward, Payday Super is about more than meeting obligations; “it’s about preserving trust with employees and strengthening long-term business resilience.”