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

The SG rate is the minimum amount you must pay, although some industrial agreements may require a higher contribution and you may agree with an employee to pay additional amounts. Any contributions in excess of the minimum requirement are not SG, and may need to be declared as reportable employer super contributions on your employees’ payment summary.

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.

When calculating SG contributions for your eligible employees, simply multiply an employee’s OTE for the quarter by the current SG rate.

If you do not pay your SG on time and to the right fund, you must instead pay SG charge, which is calculated on the employee’s salary and wages (not OTE) and is not tax deductible.

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 your employee’s quarterly 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 per week.

If you pay a contractor mainly for their labour, you calculate their SG on the labour component of their contract (see section below).

Checklist of OTE payments included for SG purposes

Awards and agreements

Allowances

Expenses

Leave

Termination payments

Bonuses

Source: ATO checklist of salary/wages and OTE

Calculating super for contractors

When calculating the SG contributions for contractors eligible for SG payments (deemed an employee for super purposes), the minimum super you must pay is the normal SG percentage of the contractor’s OTE. This is the labour component of the contract.

In calculating the OTE amount you do not need to include:

• Any contract payments for material and equipment
• Overtime for which the contractor was paid overtime rates
• Goods and services tax (GST).

If the values of the different parts of the contract are not detailed in the contract, the ATO will accept market values and normal industry practices. You are permitted to use a reasonable market value for the labour component if you cannot work it out.

Paying an additional amount equal to the SG rate to your contractor on top of their usual pay will not be accepted by the ATO as a super contribution. To avoid the SGC, you must make a SG contribution to the contractor’s super fund each quarter.

If your contractor is deemed an employee for SG purposes and entitled to receive SG contributions, they are generally eligible to select their own super fund. You must offer them a choice of fund within 28 days of their start date. Where the contractor fails to select a super fund, you must request their stapled super fund details from the ATO.

More information on the process for requesting a stapled super fund for your employees is available on the ATO website here.  

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:

• Overtime above ordinary hours identified in an award or agreement
• Casual employee overtime payments
• Expense allowances expected to be used in full
• On-call allowance outside ordinary hours of work
• Reimbursed expenses
• Payments for unfair dismissal
• Workers’ compensation payments when not working
• Bonus for overtime
• Annual leave loading if it is linked to the lost opportunity to work overtime
• Jury or defence reserve top-up payments
• Parental leave payments
• Termination payments for annual leave loading, sick leave or long service leave.

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, called the Maximum Super Contributions Base (MSCB).

The MSCB now changes in line with the concessional contribution cap to ensure required SG does not exceed the concessional cap. In financial years 2024-25 and earlier, the cap was indexed annually.

The MSCB for 2025-26 is $62,500 per quarter, which equals a maximum SG contribution of $7,500 per quarter ($62,500 x 12%).

The MSCB for 2024/25 was $65,070 per quarter, which equals a maximum SG contribution of $7,483.05 per quarter ($65,070 x 11.5%).

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.

Employees with several jobs – SG employer shortfall exemption

Employees with multiple employers can 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.

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.