Getting superannuation (SG) payments right is a cornerstone of being a compliant employer in Australia. The calculation starts with correctly determining an employee’s Ordinary Time Earnings (OTE), and the Australian Taxation Office (ATO) has recently updated its guidance to provide greater clarity.
What are Ordinary Time Earnings (OTE)?
OTE forms the basis for calculating your Super Guarantee contributions. It is defined as what an employee earns for their ordinary hours of work. However, a common point of confusion is that not every payment you make to an employee is considered OTE.
The key takeaway is that while the legal definition of OTE hasn’t changed, the ATO has enhanced its online resources with additional details and practical examples. These updates are designed to help you accurately identify which components of an employee’s pay—such as base wages, allowances, bonuses, and overtime—should be included in the OTE calculation for SG purposes.
The Future: Payday Super and Qualifying Earnings
It’s important for employers to be aware of the upcoming legislative change: Payday Super. Commencing from 1 July 2026, this initiative will require super contributions to be paid on the same day as salary and wages.
While Payday Super legislation is still pending, it is expected to introduce a new concept called ‘qualifying earnings’ to calculate SG. This new base will include OTE, but may also encompass other elements. The ATO has stated it will provide further details once the law is passed.
Why This Matters for Your Business
Misunderstanding OTE can lead to underpayment of super, resulting in significant penalties, the requirement to pay the Super Guarantee Charge, and damage to your reputation as an employer.
Proactive Steps You Can Take:
Review the Updated ATO Guidance: Visit the ATO website to access the new examples and detailed information on OTE.
Audit Your Payroll Processes: Ensure your payroll software or manual calculations are correctly identifying and including all OTE components.
Stay Informed on Payday Super: Mark your calendar for the 1 July 2026 start date and be prepared to adapt your payroll cycles once final guidance is released.
Ensuring your super calculations are accurate is not just a compliance task—it’s fundamental to your employees’ financial futures and your business’s integrity. If you’re unsure whether your current payroll practices are correctly capturing OTE, seeking professional advice is a wise investment.
Need help navigating these updates? Our team can assist with a review of your payroll processes to ensure full compliance with SG obligations.
Disclaimer: Any advice on this site is general nature only and has not been tailored to your personal objectives, financial situation and needs. Please seek personal advice prior to acting on this information. Because of that, before acting on the advice, you should consider its appropriateness to you, having regard to your objectives, financial situation or needs.
