Superannuation on overtime: What you need to know

Superannuation is a long-term savings plan that helps Australian workers save for their retirement. It is compulsory for most employers in Australia to pay superannuation to their employees, based on their ordinary time earnings (OTE). Overtime is work that is done beyond an employee's ordinary hours of work. In Australia, superannuation is not generally paid on overtime, as it is considered to be additional compensation for the extra work done.

The current situation

The law on superannuation and overtime in Australia is set out in the Superannuation Guarantee (Administration) Act 1992. The Act states that employers must pay superannuation on all OTE, including commissions, shift loadings, allowances, and bonuses. However, overtime is not included in the definition of OTE. This means that employers are not required to pay superannuation on overtime payments.

What counts as OTE (ordinary time earnings):

• Base salary

• Commissions

• Shift loadings

• Allowances

• Bonuses

• Payments for overtime that is not considered "additional compensation"

Exceptions: When overtime does count as OTE:

• Overtime that is considered to be "additional compensation": This includes payments for working on public holidays, in dangerous or hazardous conditions, or in remote areas.

• Payments for casual loading: This is a loading that is paid to casual employees to compensate them for the lack of guaranteed hours and benefits.

• Payments for shift allowances: This is a loading that is paid to employees who work shifts, to compensate them for the inconvenience of working at non-standard hours.

• Payments for allowances: This includes payments for things like travel allowances, meal allowances, and clothing allowances.

• Payments for bonuses:** This includes both discretionary bonuses and non-discretionary bonuses.

It is important to note that the definition of OTE can vary depending on the individual's employment contract or award. It is always best to check with your employer or union to make sure you understand what is considered OTE in your case. If you are a member of a Self Managed Super Fund and want guidance about your situation, consider our extensive SMSF accountant service and contact us today.