One of the most common payroll questions employers ask is: is super paid on overtime? A qualified Tax Accountant Melbourne like Nobel Thomas can help employers navigate these rules and incorporate them into their broader tax planning strategy.
Is Super Paid on Overtime?
The answer depends on the nature of the overtime payments and whether they form part of an employee’s Ordinary Time Earnings (OTE).
Employers are generally required to pay superannuation on Ordinary Time Earnings.
What Is Ordinary Time Earnings?
Ordinary Time Earnings (OTE) include:
- Ordinary hours of work.
- Commissions.
- Shift loadings.
- Certain bonuses.
- Paid annual leave.
Superannuation Guarantee contributions are calculated on these amounts.
Note that genuine overtime payments are generally excluded from OTE.
Is Super Paid on Overtime Worked Outside Ordinary Hours?
The answer to is super paid on overtime is generally no when the overtime is genuine overtime.
Super is usually not payable when:
- The overtime is worked outside the employee’s ordinary hours.
- The overtime is separately identified on the payslip.
- The employee receives overtime rates under an award or employment contract.
Example
Sarah works 38 hours per week and earns $35 per hour. She also works 10 additional hours on Saturday and is paid time-and-a-half.
- Ordinary wages (38 hours): Super applies.
- Genuine overtime payments (10 hours): Super generally does not apply.
When Is Super Paid on Overtime?
There are circumstances where the answer to is super paid on overtime is yes.
If an employee’s contract specifies that additional hours form part of their ordinary roster, those hours are considered Ordinary Time Earnings and super must be paid.
For example, if Tom’s employment contract requires him to work 45 ordinary hours per week, super applies to all 45 hours.
Other Payments and Superannuation
Payment Type | Super Payable? |
Ordinary wages | Yes |
Shift loadings | Yes |
Commissions | Yes |
Bonuses relating to ordinary hours | Yes |
Genuine overtime payments | No |
Annual leave | Yes |
Long service leave taken | Yes |
Expense reimbursements | No |
Why Employers Need to Get It Right
Incorrect super calculations can lead to:
- Superannuation Guarantee Charge (SGC).
- Interest and penalties.
- Payroll compliance issues.
- Additional administration costs.
Many businesses incorrectly assume that super is payable on all wages.
An experienced Tax Accountant Melbourne like Nobel Thomas can review payroll systems and identify any issues before they become ATO problems.
Tax Planning Considerations
Payroll compliance should form part of a broader tax planning strategy. Businesses should:
- Ensure overtime is separately identified.
- Review employment contracts and awards.
- Reconcile super contributions regularly.
- Confirm payroll software settings are accurate.
- Consider salary sacrifice opportunities.
Need Advice?
At Nobel Thomas, our experienced Tax Accountant Melbourne team assists businesses with:
- Payroll compliance.
- Superannuation obligations.
- Business tax planning.
- Year-end reviews.
- Tax advice and structuring.
If you are unsure whether super should be paid on overtime, speak with our team. We can help ensure your payroll systems are compliant and your tax planning strategies are working effectively.
