Is Superannuation Payable on Overtime?

Determining Eligibility for Super Guarantee Payments

As small business owners, we have many different roles to fill and we don’t always know the answer. Superannuation is one of those anomalies that we need to call in the experts to help with.

The Super Guarantee

Generally, if you pay an employee $450 or more (before tax) in a calendar month, you have to pay super guarantee (SG) on top of their wages.

We also know that the minimum super you must pay each quarter for each eligible employee is called the super guarantee (SG). Currently, the SG is 10% of their ordinary time earnings (OTE).

OTE is usually the amount your employee earns for their ordinary hours of work. It includes things like commissions, shift loadings and allowances and bonuses, but not overtime payments.

To work out what you must pay, multiply your employee’s OTE for the quarter by the SG rate (or the percentage you use if you’re paying super at a higher rate).

Payments Not Considered as OTE

Payments for work performed outside an employee’s ordinary hours of work are not OTE. This applies even if:

• the payments are calculated at an hourly rate
• the employee gets a specific loading
• the payments are calculated as an annualised or lump sum component of a total salary package

But if you can’t distinctly identify overtime amounts, the hours actually worked will be included in ordinary hours of work.

When Super Is Not Payable

Superannuation is generally not payable on overtime. Some of the examples of where super is not payable for overtime (and as such the payments are not classified as OTE) are below:

1. Overtime hours – award stipulates ordinary hours to be worked and the employee works additional hours for which they are paid overtime rates
2. Overtime hours – agreement prevails over award
3. Casual employee: overtime payments
4. A casual employee whose hours are paid at overtime rates due to a ‘bandwidth’ clause
5. Overtime component of earnings based on hourly-driving-rate method stipulated in an award.

When Super Is Payable

Some of the examples of where super is payable, as hours can’t be distinctly identified as overtime (and as such the payments are classified as OTE) are below:

1. Agreement supplanting award removes the distinction between ordinary hours and other hours
2. No ordinary hours of work stipulated

See this brochure provided by the ATO to help you determine your superannuation obligations.

If you have any queries, please contact our office at Advivo today. We are here to help you.

 

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*Please note, at the time of writing this post, the Superannuation Guarantee was 9.5%. This has been amended to reference the Superannuation Guarantee as of 1 July 2021, which is 10%.