Module 4: Calculating super guarantee

How to calculate super guarantee

Super guarantee (SG) is the minimum super you must pay each quarter for each eligible employee to avoid paying the super guarantee charge (SGC). SG is based on the employee's ordinary time earnings multiplied by the current super guarantee rate.

Ordinary time earnings are usually the amounts your employee earns for their ordinary hours of work. It includes commissions, shift loadings and some allowances, but not overtime payments.

See our list of payments that are salary or wages and ordinary time earnings to help you identify what payments are considered part of ordinary time earnings (OTE) for SG purposes. Remember, SG is calculated on OTE and not on total salary or wages.

To calculate SG, multiply your employee's ordinary time earnings for the quarter by the current super guarantee rate.

The example below is based on the percentage for the financial year in which the employee was paid.

If you make super contributions under an award, check that those contributions meet both the award and SG obligations.

Generally, you can claim a tax deduction for SG payments you make as long as you pay them on time and to the right fund.

You can claim the tax deduction in the same financial year your payment is received by the super fund.

See the due dates in Module 5: (Paying super contributions).

Amounts included in the calculation

Make sure you understand the following terms used when calculating super guarantee.

Ordinary time earnings

Ordinary time earnings (OTE) refers to what your employees earn for their ordinary hours of work. OTE include:

• over-award payments
• commissions
• shift loading
• some allowances
• bonuses.

This list of payments that are ordinary time earnings shows various types of payments that employees may receive. It shows whether those payments are considered part of OTE.

From 1 January 2020, salary sacrificed super contributions will not reduce OTE or count towards the employer's SG contributions. See Salary sacrificing for employees.

Ordinary hours

Your employee's ordinary hours will be the normal hours they work unless their hours are specified in an award or agreement.

If you can't determine the normal hours of work (for example, for casual workers), the actual hours the employee works will be their ordinary hours of work.

Under the Fair Work Act 2009, ordinary hours for workers who are not under an award or agreement is capped at 38 hours. This definition does not override the superannuation laws stated above.

Overtime payments

Payments for work performed outside an employee's ordinary hours of work are not ordinary time earnings. This applies even if the:

• payments are calculated at an hourly rate
• employee gets a specific loading
• payments are calculated as an annualised or lump sum component of a total salary package.

However, if you can't distinctly identify overtime amounts, the hours actually worked will be included in ordinary hours of work.

Back pay

You must pay SG on back pay (of salary or wages) even if the employee no longer works for you. If you don't, you'll be liable for the SGC.

Maximum contribution base

You don't have to pay SG for your employee's earnings above a certain limit. This is called the maximum contribution base.

This base is indexed annually and is available before the start of each financial year. It doesn't apply to other mandated contributions, such as contributions you pay under an award.

While the maximum contribution base limits the amount that you have to pay for SG purposes, funds can accept contributions above it. Your employees should be aware that SG contributions count towards their concessional contributions cap in the year the fund receives the contributions.

Using the super guarantee contributions calculator

You can use the Super guarantee contributions calculator to work out how much super to contribute for your eligible workers.

Using the SG calculator, you can:

• select the minimum SG rate
• increase the rate based on the arrangement you have with your employees.

The calculator displays your SG calculation. It will provide the:

• sub-total of SG amounts payable to each super fund
• total of all SG contributions payable.

Note: SG transitional rates apply to Norfolk Island, starting at 1% on 1 July 2016 and increasing 1% yearly to 12% on 1 July 2027. When using the calculator, Norfolk Island employers will need to enter the relevant SG rate. For more information, see Norfolk Island tax and super.

Activity

Take a few minutes to explore the Super guarantee contributions calculator.

Not all fields in the SG contributions calculator are required to work out how much super you need to contribute for your eligible employees:

• You will need the OTE amount that super is payable on for each employee for the period.
• You can also include the personal details of your employees, including their name and super fund details.

Check your understanding

Work through the example below and attempt the questions to check your understanding of the topics in this module. The examples below are based on the super guarantee rate for the financial year in which the employee was paid.

Answers

Question 1: A is correct. Amanda’s super guarantee is calculated as her ordinary time earnings × 11%.

Question 2: A is correct. The $3,000 is ordinary time earnings. The overtime and bonus for overtime are not ordinary time earnings.

Question 3: B is correct. Super guarantee = ordinary time earnings × 11% = $3,000 × 11% = $330.

Summary of Module 4

Remember, when calculating super guarantee:

• Super guarantee equals ordinary time earnings multiplied by the current super guarantee rate.
• Use the salary or wages and ordinary time earnings checklist to
  • help you identify which payments are salary or wages
  • check if the salary or wages are considered part of ordinary time earnings for super guarantee purposes.
• Use the Superannuation guarantee contributions calculator to work out how much super to contribute for your eligible workers.

Return to Module 3: Setting up super for your employees.

Continue to Module 5: Paying super contributions.