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

On this page

How to calculate the Super Guarantee
What’s included in the SG calculation
Checklist of OTE payments included for SG purposes
Calculating super for contractors
What’s not included in the SG calculation
Tips for high income employees: Watch the SG contribution cap
Employees with several jobs – SG employer shortfall exemption

Calculating and paying the right amount of Superannuation Guarantee (SG) contributions for your employees is important, particularly as the ATO has indicated this is an area it will be focussing on.

So, to avoid unwanted attention from the tax man, employers need to get their quarterly SG contribution amounts correct and submitted on time.

But not every payment you make to an employee needs to be included when you calculate the SG contribution amount, so read on to learn more about the current rules.

Super tip

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

Your tax deduction can be claimed for 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 11% (in 2023–24) of an eligible employee’s ordinary time earnings (OTE) to their super account. (The SG rate is legislated to rise to 11.5% on 1 July 2024 and finally to 12% on 1 July 2025.)

Check out the current and future SG rate and rules.

The SG rate is the minimum amount you must pay, although some industrial awards require a higher contribution. 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.

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

Learn about employee eligibility for the SG.

Case study

Rakesh works full time as an administrative assistant on a salary of $56,000. During the July to September quarter in 2023–24, Rakesh’s ordinary time earnings are $14,000.

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 ($14,000) x SG rate (11%) = $1,540

To meet his obligations under super law, Rakesh’s employer must contribute at least $1,540 to Rakesh’s super fund.

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).

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 type	Salary or wages	Ordinary time earnings (OTE)
Overtime hours over and above ordinary hours stated in award or agreement	Yes	No
Overtime where no ordinary hours of work stated in award or agreement, or not separated from other hours	Yes – all hours worked	Yes – all hours worked
Casual employee: shift loadings	Yes	Yes
Casual employee: overtime payments	Yes	No
Piece-rates – no ordinary hours of work stipulated	Yes	Yes
Commission	Yes	Yes

Allowances

Payment type	Salary or wages	Ordinary time earnings (OTE)
Allowance by way of unconditional extra payment	Yes	Yes
Expense allowance to be used in full	No	No
Danger or site allowance	Yes	Yes
Retention allowance	Yes	Yes
On-call allowance outside ordinary hours of work	No	No
Hourly on-call allowance in relation to ordinary hours of work for doctors	Yes	Yes

Expenses

Payment type	Salary or wages	Ordinary time earnings (OTE)
Reimbursement of expenses	No	No
Petty cash	No	No
Reimbursement of travel costs	No	No
Payments for unfair dismissal	No	No
Workers’ compensation: returned to work	Yes	Yes
Workers’ compensation: not working	No	No

Leave

Payment type	Salary or wages	Ordinary time earnings (OTE)
Annual leave	Yes	Yes
Annual leave loading – clearly linked to a loss of opportunity to work overtime	Yes	No
Annual leave loading – all other	Yes	Yes
Sick leave	Yes	Yes
Parental leave – e.g. maternity leave, paternity leave, adoption leave	No	No
Ancillary leave – e.g. jury duty, defence reserve service	No	No
Long service leave	Yes	Yes

Termination payments

Payment type	Salary or wages	Ordinary time earnings (OTE)
Termination payments: in lieu of notice	Yes	Yes
Termination payments: unused annual leave, long service leave or sick leave	Yes	No

Bonuses

Payment type	Salary or wages	Ordinary time earnings (OTE)
Performance bonus	Yes	Yes
Christmas bonus	Yes	Yes
Bonus in respect of overtime only	Yes	No

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.

Need to know

You are not permitted to use an employee’s salary-sacrifice super contributions to reduce your SG payment obligations – regardless of the amount your employee elects to salary sacrifice.

In addition, you must calculate the SG as a percentage of the employee’s ordinary time earnings (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.

Prior to 1 January 2020, the law permitted employers to use salary sacrifice to reduce SG obligations and to calculate SG on the remaining OTE after salary-sacrifice deductions. Ensure your payroll system has been updated to account for the current law.

Learn more about creating salary-sacrifice arrangements with your employees.

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 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 2023–24 is $62,270 per quarter, which equals a maximum SG contribution of $6,849.70 per quarter ($62,270 x 11%).

The MSCB for 2022–23 was $60,220 per quarter, which equals a maximum SG contribution of $6,323.10 per quarter ($60,220 x 10.5%).

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.

Learn about the Maximum Super Contribution Base (including past MSCB caps).

Employees with several jobs – SG employer shortfall exemption

From 1 January 2020, 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.

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 Shortfall Exemption Certificate releases you from your SG obligations for the employee for up to four quarters in one financial year. It does not, however, change your obligations under a workplace award or agreement, or your agreement with their super fund. If another agreement requires you to contribute, you must still do so despite the exemption certificate. Your employee should discuss with you whether you will be able to comply with an exemption certificate before making their application to the ATO.