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Home / How super works / Employers guide to super / Calculating your employees’ SG contributions? The rules to help get it right

Calculating your employees’ SG contributions? The rules to help get it right

November 13, 2020 by Janine Mace Leave a Comment

Reading time: 4 minutes

On this page

  • How to calculate the Super Guarantee
  • What’s included in the SG calculation
  • Checklist of OTE payments included for SG purposes
  • What’s not included in the SG calculation
  • Employees with several jobs – SG employer shortfall exemption
  • Checking your calculations: Super Guarantee Contributions Calculator

Working out the right amount for the quarterly Superannuation Guarantee (SG) contributions you need to make on behalf of your employees can be tricky.

Not every payment you make to an employee needs to be included when you calculate your 9.5% SG contribution, so you need to ensure you get it right.

Check out SuperGuide’s tips on the rules to help make your task a whole lot easier.


Super tip

In most cases, you can claim a tax deduction for the SG payments you make for your eligible employees provided you pay them by the quarterly due date and to the correct super fund.

Your tax deduction can be claimed in the same financial year as the payment is received by the super fund.


How to calculate the Super Guarantee

The general rule when it comes to calculating the SG for your employees is each quarter you must pay 9.5% of an eligible employee’s ordinary time earnings (OTE) to their super account.

The 9.5% rate is the minimum amount you must pay, although some industrial awards require a higher contribution amount. When making super contributions for employees covered by an industrial award, it’s important to ensure your contributions are sufficient to cover both the amounts required by the award and also the SG rules.

An employee’s OTE is usually calculated as the amount they earn for their ordinary hours of work and includes things like commissions, shift loadings and allowances, but not overtime payments.


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When calculating SG contributions for your employees, simply multiply an employee’s OTE for the quarter by the current SG rate (9.5% in 2020/21).


Case study

Rakesh works full time as an administrative assistant on a salary of $36,000. During the July to September quarter in 2020/21, Rakesh’s ordinary time earnings are $9,000.

His employer works out how much quarterly SG he needs to contribute to Rakesh’s super fund by multiplying Rakesh’s OTE for the quarter by the current SG rate:

Quarterly OTE ($9,000) x SG rate (9.5%) = $855

To meet his obligations under super law, Rakesh’s employer must contribute at least $855 to Rakesh’s chosen super fund (or RSA), or the company’s default super fund (if Rakesh has not selected a super fund) by the quarterly deadline.


For more information on the SG, read SuperGuide articles:

  • Superannuation Guarantee (SG) rules for employers
  • Your simple guide to Superannuation Guarantee (SG) contributions
  • 2020/21 guide to concessional contributions (before-tax super contributions)

What’s included in the SG calculation

There are a range of employee payments considered as OTE and these must be included when you calculate an employee’s SG contribution.

In working out OTE, you need to understand the definition of ordinary hours. These are the normal hours your employees work, unless specified in an award or agreement. In situations where there are no normal hours (such as for casuals), these are the actual hours worked.

Under the Fair Work Act 2009, ordinary hours for employees not working under an industrial award or enterprise agreement are capped at 38 hours.


Case study

Andrea is employed at an IT service desk and her contract requires her to work a minimum number of hours a week. By agreement with her employer, she often works additional shifts if it’s mutually convenient, although there is no consistency or pattern to when this happens.

Andrea’s employment is not governed by an award or agreement specifying her ordinary hours of work. Any extra shifts she works are not paid overtime penalties or extra payments.

As Andrea’s wage payments are a reward for services provided as an employee, they are classed as salary or wages. Since there are no stipulated ordinary hours of work for Andrea’s employment and no obvious pattern of regular or usual hours, all the hours she works are classed as ordinary hours of work and all her wages are OTE.

Source: Adapted from the ATO website


Checklist of OTE payments included for SG purposes

Awards and agreements

Payment typeSalary or wagesOrdinary time earnings (OTE)
Overtime hours – award stipulates ordinary hours to be worked and employee works additional hours for which they are paid overtime ratesYesNo
Overtime hours – agreement prevails over awardYesNo
Agreement supplanting award removes distinction between ordinary hours and other hoursYes – all hours workedYes – all hours worked
No ordinary hours of work stipulatedYes – all hours workedYes – all hours worked
Casual employee: shift loadingsYesYes
Casual employee: overtime paymentsYesNo
Casual employee whose hours are paid at overtime rates due to a ‘bandwidth’ clauseYesNo
Piece-rates – no ordinary hours of work stipulatedYesYes
Overtime component of earnings based on hourly-driving-rate method stipulated in awardYesNo

Allowances

Payment typeSalary or wagesOrdinary time earnings (OTE)
Allowance by way of unconditional extra paymentYesYes
Expense allowance expected to be fully expendedNoNo
Danger allowanceYesYes
Retention allowanceYesYes
Hourly on-call allowance in relation to ordinary hours of work for doctorsYesYes

Expenses

Payment typeSalary or wagesOrdinary time earnings (OTE)
ReimbursementNoNo
Petty cashNoNo
Reimbursement of travel costsNoNo
Payments for unfair dismissalNoNo
Workers’ compensation: returned to workYesYes
Workers’ compensation: not workingNoNo

Leave

Payment typeSalary or wagesOrdinary time earnings (OTE)
Annual leaveYesYes
Annual leave loading – demonstrably referable to a loss of opportunity to work overtimeYesNo
Annual leave loading – all otherYesYes
Sick leaveYesYes
Parental leave – e.g. maternity leave, paternity leave, adoption leaveNoNo
Ancillary leave – egg jury duty, defence reserve serviceNoNo

Termination payments

Payment typeSalary or wagesOrdinary time earnings (OTE)
Termination payments: in lieu of noticeYesYes
Termination payments: unused annual leave, long service leave or sick leaveYesNo

Bonuses

Payment typeSalary or wagesOrdinary time earnings (OTE)
Performance bonusYesYes
Bonus labelled as ex-gratia but in respect of ordinary hours of workYesYes
Christmas bonusYesYes
Bonus in respect of overtime onlyYesNo

Source: ATO checklist of salary/wages and OTE

What’s not included in the SG calculation

A range of employee payments are not considered as OTE and are not included in SG calculations, including:

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  • Overtime
  • Fully expended expense allowances (including car allowances)
  • Reimbursed expenses
  • Jury or defence reserve top-up payments
  • Parental leave payments
  • Termination payments for annual leave loading, sick leave or long service leave
  • Redundancy payments
  • Dividends, partnership and trust distributions
  • Restraint of trade agreement payments

Need to know

From 1 January 2020, new rules mean employers are not permitted to use an employee’s salary sacrifice super contributions to reduce their SG payment obligations – regardless of the amount your employee elects to salary sacrifice.

In addition, the SG must be calculated on 9.5% of the employee’s OTE base, which is the sum of the employee’s OTE and any amounts that would have been OTE had they not been salary sacrificed.

For more information on salary sacrifice, read SuperGuide’s Salary sacrifice and super: How does it work?


Good to know: SG and JobKeeper

During the COVID-19 crisis, the government has been paying a $1,500 JobKeeper support payment.

Eligible employees must receive at least $1,500 per fortnight (before tax), even if they normally earn less. Employers must continue paying the SG to the employee’s super fund on the amount they receive as a JobKeeper payment.

When an employee’s usual salary per fortnight is less than the $1,500 JobKeeper payment, it is up to the employer to decide whether it will pay the SG on the additional money received as a JobKeeper payment.

For example, if your employee normally earns $1,000 per fortnight (before tax), but the JobKeeper payment provides them with an additional $500 per fortnight (before tax), you must continue paying SG on the $1,000 per fortnight. Paying SG on the additional $500 (before tax) the employee is receiving is optional.


Tips for high income employees: Watch the SG contribution cap

When it comes to your employees on higher salaries, you are only required to make SG contributions on their earnings up to an annual cap, which is called the Maximum Super Contributions Base (MSCB).

The MSCB is indexed to Average Weekly Ordinary Time Earnings (AWOTE), so it changes every financial year. It does not apply to other mandated contributions such as those paid under an award.

The MSCB for 2020/21 is $57,090 per quarter, which equals a maximum SG contribution of $5,423.55 per quarter ($57,090 x 9.5%). Amounts for previous years are listed below:

Maximum super contributions base (MSCB) for 2020/21 and previous years

Income yearIncome per quarterMaximum SG contribution per quarter
(SG contribution rate x quarterly income)
2020/21$57,090$5,423.55
2019/20$55,270$5,250.65
2018/19$54,030$5,132.85
2017/18$52,760$5,012.20
2016/17$51,620$4,903.90
2015/16$50,810$4,826.95
2014/15$49,430$4,695.85
2013/14$48,040$4,443.70
2012/13$45,750$4,117.50
2011/12$43,820$3,943.80
2010/11$42,220$3,799.80
2009/10$40,170$3,615.30
2008/09$38,180$3,436.20

Source: ATO

The MSCB is a quarterly income figure, so it aligns with your obligation to make SG contributions into your employees’ super accounts on a quarterly basis.

Learn more about the Maximum Super Contribution Base.

Employees with several jobs – SG employer shortfall exemption

From 1 January 2020, employees with multiple employers are able to opt out of receiving SG contributions from some of their employers so they do not unintentionally go over their concessional (before-tax) contributions cap.

Employees in this situation can submit a Super guarantee opt out for high income earners with multiple employers form to the ATO.

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They then receive an Employer SG Shortfall Exemption Certificate to give to one or more of their employers to release them from their SG obligation for that employee. The employee must still be receiving SG contributions from at least one of their employers each quarter.

As an employer, you cannot apply for an exemption on behalf of your employee.


Need to know

If an employee provides you with an SG shortfall exemption certificate to release you from your SG obligations, you can choose to disregard the exemption certificate and pay the necessary SG contribution.

An SG employer shortfall exemption certificate releases you from your SG obligations for the employee for up to four quarters in one financial year.


Checking your calculations: Super Guarantee Contributions Calculator

If you’re still confused – or want to double check your SG contribution calculations – the ATO has a useful tool on its website to help you work out the SG amounts you need to pay for your eligible workers.

The ATO’s Super Guarantee Contributions Calculator tool works out how much super you need to contribute for your eligible employees. It allows you to calculate your contributions weekly, fortnightly, monthly or quarterly.

The calculator tool also works out SG sub-totals for each individual super fund and the total of all your payable SG contributions.

If you’re unsure if one of your employees is eligible to receive an SG contribution from you, use the ATO’s SG Eligibility Decision Tool before starting.


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Learn more about employer super responsibilities in the following SuperGuide articles:

Quiz: Employer super responsibilities

December 1, 2020

Employee or contractor for super purposes? How to tell the difference

November 13, 2020

How to create an effective salary sacrifice arrangement with your employees

November 13, 2020

Employee super contributions for the self-employed and micro businesses

November 13, 2020

Checklist for employers: 7 tips to help you master your super responsibilities

November 13, 2020

Employer’s guide to Superannuation Guarantee (SG) contributions: Which employees are eligible?

November 13, 2020

Choosing a default fund for your employees

November 13, 2020

Learn more about the superannuation guarantee (SG) in the following SuperGuide articles:

Retirement Income Review finds 9.5% super is enough

November 23, 2020

Employer’s guide to Superannuation Guarantee (SG) contributions: Which employees are eligible?

November 13, 2020

What to do if your employer doesn’t pay your super

September 18, 2020

Your simple guide to Superannuation Guarantee (SG) contributions

September 1, 2020

What is the maximum super contribution base for 2020/21?

September 1, 2020

Does the ATO do enough on unpaid super?

June 12, 2019

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All information on SuperGuide is general in nature only and does not take into account your personal objectives, financial situation or needs.

You should consider whether any information on SuperGuide is appropriate to you before acting on it.

If SuperGuide refers to a financial product you should obtain the relevant product disclosure statement (PDS) or seek personal financial advice before making any investment decisions.

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