Q: I’m a shift worker and have a question about whether my ‘Super fund salary’ figure which my employer gives to my super fund should include both my base and shift loading salary. At the moment it only includes my base even though my employer does pay super for both my base and shift loading. What I’m concerned about is that they only give my base salary to my super fund which is what is used to calculate my life insurance and income protection. My shift loading is permanent 33% on top of my base salary and never changes. So shouldn’t my total base and shift loading salary be given to my super fund, so they can base my life insurance and income protection benefits on my total salary?
I have split your question into two parts. First, ‘what working income is counted for Superannuation Guarantee entitlements?’, and second, ‘what working income is counted for the purposes of income protection insurance coverage, and life insurance?’.
How is my 9.5% SG calculated?
The Superannuation Guarantee laws require an employer to pay to a super fund, the equivalent of 9.5% of what an employee receives from ordinary time earnings (OTE). According to the ATO, ordinary time earnings are generally what you earn for ordinary hours of work, including over-award payments, any shift or casual loading, commission, certain allowances and performance bonuses. (Any payment for overtime isn’t included as income for the purposes of calculating the 9.5% SG).
Note: Payments for unused annual leave or unused long service leave, or a payment for unclaimed sick leave is not counted as part of OTE.
Quoting directly from the ATO’s website:
An ‘employee’s ordinary hours of work’ are the hours specified as their ordinary hours of work under the relevant award or agreement, or under the combination of documents, that governs the employee’s conditions of employment.
If the ordinary hours of work are not specified in a relevant award or agreement, the ‘ordinary hours of work’ are the normal, regular, usual or customary hours worked by the employee, as determined by all the circumstances in the case. This is not necessarily the minimum or maximum number of hours worked or required to be worked.
Where it is not possible or practicable to determine the normal, regular, usual or customary hours of work of an employee, the actual hours worked by the employee are taken to be their ordinary hours of work.
What income is used for assessing income protection insurance cover?
We’re not sure what super fund you belong to, but we are aware that the ‘super fund salary’ in some public sector funds is different from an individual’s actual salary because the ‘salary’ used is an average salary.
Your circumstances sound unusual however, and it may be an error, because we have checked the income protection policies of a few super funds, and all of the super funds that we reviewed included total income (including salary sacrificed contributions and even regular overtime) as ‘salary’.
As a first step, check with your employer to see whether they have failed to update the paperwork they send to the super fund. You can then approach your super fund and check what the definition of ‘salary’ is for the purposes of the fund’s income protection insurance, and life insurance, and whether it includes shift loading (which it should).
Also, most super funds permit individuals to take out additional income protection cover or life insurance cover, subject to submitting certain information, and usually after undergoing a medical exam.
For more information…
For more information about insurance and your super account, see the following SuperGuide articles:
- Comparing super funds: Top 20 cheapest funds for income protection insurance
- Comparing super funds: Top 20 cheapest funds for life insurance
- Life insurance and super: 10 facts you should know
- Cost shock: Paying too much for insurance in your super fund?
- Comparing funds: Which super funds offer the cheapest insurance?
- Four reasons to buy insurance inside your super fund
- Life insurance: One in five parents will die early, or be too sick to work
- SMSFs must consider life insurance needs
- SMSFs: Can I transfer my life insurance to my DIY super fund?
- SMSFs: If I die young, will my wife pay super tax on the life insurance payout?
- SMSFs: Trauma insurance is not OK
- Accessing super: How long does it take for TPD insurance to be paid out?
- Can I access my super early because of my disability?