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Superannuation is a vital part of every Australian employer’s payroll process – and getting it right is more important than ever for compliance and staff satisfaction. Whether you’re hiring your first employee or reviewing your existing payroll systems, understanding how to calculate superannuation in Australia will save your business time, money and potential legal headaches down the track.
The good news? While super can seem complex due to changing rates and detailed rules, the core calculation is straightforward once you know what’s included. This guide walks you through exactly how to calculate superannuation for your team, demystifies common formulas and legal requirements, and offers practical tips for staying compliant (including recommended calculators and tracking tools).
Whichever stage your business is at, we’re here to break it down, answer key questions, and highlight what you need to do now – and what legal documentation will help keep everything running smoothly.
What Is Superannuation and Why Does It Matter?
Superannuation (or “super”) is a compulsory system that helps Australians save for retirement. As an employer, you are legally required to pay super contributions into each eligible employee’s nominated super fund. These payments are calculated as a percentage of the employee’s ordinary time earnings (OTE) and must be made at least quarterly.
Failure to pay the correct amount, or missing deadlines, can trigger Penalties from the Australian Taxation Office (ATO) and undermine your team’s trust in your business.
- Superannuation Guarantee (SG): The minimum percentage of OTE you must pay. This rate is set by law (currently 11% for the 2023-24 financial year but check ATO updates for any changes).
- Ordinary Time Earnings (OTE): Most salary, wages, commissions, shift loadings and some allowances. OTE excludes things like overtime and certain expense reimbursements.
Understanding your superannuation obligations is not just about compliance – it’s a mark of being a responsible employer, and it contributes directly to your business reputation and ability to attract and keep great staff.
How to Calculate Superannuation in Australia: The Essentials
Let’s go straight to the core: how do you work out superannuation amounts for each employee?
Step 1: Identify Eligible Employees
Generally, you must pay super for employees who are:
- Aged 18 or older and earning more than $450 per month (from 1 July 2022, the $450 threshold was removed – so now nearly all employees qualify, even if casual or part-time).
- Under 18 but working more than 30 hours a week.
- Certain contractors (if paid mainly for their labour, even if they have an ABN).
For a deeper dive into contractor vs. employee status, see our guide on Employee vs. Contractor.
Step 2: Calculate Ordinary Time Earnings (OTE)
Your next step is to determine each worker’s OTE. This is generally their gross earnings for ordinary hours (not overtime). It includes:
- Basic salary or wages
- Annual leave, personal leave, sick leave payments
- Shift loadings, bonuses (if for ordinary hours)
- Certain commissions and allowances
Exclusions: Don’t include overtime, reimbursements, unused leave paid out on termination, or certain allowances. For specific scenarios, always check the ATO’s Super OTE Guide.
Step 3: Apply the Superannuation Guarantee (SG) Rate
Once you know the OTE, apply the SG rate. The basic formula to calculate super from total package is:
Superannuation = Ordinary Time Earnings × Superannuation Guarantee Rate
For 2023-24, this means:
Superannuation = OTE × 11%
Example: If an employee earns $1,500 in OTE for the month,
Super = $1,500 × 11% = $165 (must be paid into their super fund).
What if You Offer a “Salary Package” That Includes Super?
When employees are paid a total remuneration package (inclusive of super), you’ll need to work out the super portion that’s already within that combined amount.
Here’s the formula to calculate super from total package:
Superannuation = Total Package × [SG Rate ÷ (1 + SG Rate)]
So, with an 11% rate and a $100,000 salary package (inclusive of super):
Super = $100,000 × [0.11 ÷ 1.11] = $9,909.09
OTE = $100,000 – $9,909.09 = $90,090.91 (the component paid as salary/wages).
If you’d like help documenting and explaining these salary arrangements, our employment contract templates can make things clear from day one: see our guide on employment contracts.
Using Superannuation Calculators and Trackers
ATO Superannuation Calculator
The ATO offers a free Superannuation Guarantee Contributions Calculator. This online tool helps work out:
- Which employees you should pay super for
- How much super is owed, based on pay periods, OTE, and SG rates
- Deadlines for payment
If you’re new to employing or your arrangements are unusual (for example, frequent bonuses or salary sacrifice), the ATO calculator is a helpful tool for getting it right.
Superannuation Trackers and Payroll Systems
Staying on top of super isn’t just about the calculation, but about accurate tracking and timely payments. Modern payroll software (like Xero, MYOB, and others) integrates super tracking – automatically calculating amounts and generating payment files.
Make sure your payroll system is up-to-date and properly configured for the latest SG rate. If you’re not using payroll software, consider a simple spreadsheet tracker, but double-check calculations using the ATO calculator or with your accountant. Late or missing payments can lead to the ATO imposing the super guarantee charge (SGC), which includes interest and admin fees.
How to Work Out Superannuation from Salary Package?
If you’re including superannuation as part of an employee’s advertised “package” – for example, “$80,000 package inclusive of super” – your calculation will differ from when paying super on top of an employee’s base salary.
To work out the super portion included in the total remuneration:
- Divide the package amount by (1 + SG rate).
For an 11% rate: $80,000 ÷ 1.11 ≈ $72,072.07 (base salary component). - The remainder is the super component.
Super = $80,000 – $72,072.07 = $7,927.93
If you pay a “base plus super” salary, simply multiply the base by the SG rate to get the required contribution.
The most important thing is transparency – clearly state in your employment contracts whether a salary is quoted as “inclusive of super” or “plus super”, and double-check calculations at least quarterly.
Common Superannuation Mistakes Employers Make
Despite the best intentions, employers often stumble over a few key things:
- Incorrect OTE Calculation: Including (or excluding) bonuses or overtime incorrectly.
- Missing New Employees: Forgetting to pay super if someone is part-time, under 18 (but works enough hours), or is a contractor deemed an employee.
- Late Payments: Super is due at least quarterly, but it’s best to align payments with your pay cycles to avoid accidentally missing deadlines.
- Not Updating SG Rate: The SG rate increases from time to time. Ensure your payroll systems and budgeting reflect the current rate (see our tips for effective payroll compliance).
- Poor Record-Keeping: Keeping incomplete records can lead to disputes or audit difficulties. Maintain up-to-date super records for at least five years.
When in doubt, or if your business is growing and payroll is getting more complex, it’s a great time to seek professional advice or run a risk check – see our article on protecting your business.
Superannuation and Legal Compliance: What Other Laws Do You Need to Follow?
Paying the correct super isn’t your only employment law obligation as a business owner in Australia. To set your business up for compliance and success, consider the following:
- Fair Work Laws: Meet minimum pay, conditions, and super requirements under national and modern awards. Learn more about employer obligations under the Fair Work Act.
- Employment Contracts: Clearly state whether salaries are inclusive/exclusive of super, and describe super arrangements in writing to avoid disputes.
- Australian Consumer Law (ACL): If you sell products or services, understand refunds, advertising, and consumer rights. See our guide to ACL for businesses.
- Single Touch Payroll (STP): Employers must report payroll and super information to the ATO with each pay cycle using STP-enabled software.
- Data Privacy: If you collect personal or payroll data, you’ll need a Privacy Policy and strong data protection systems.
Having the right documents in place – like employment agreements, privacy policies, and superannuation clauses – can save you from legal disputes, audits and team confusion as you grow.
What Legal Documents Do I Need for Payroll and Super?
To protect your business and make superannuation obligations clear, review and update your key employment documents:
- Employment Contract: Outlines pay, position, working hours, superannuation inclusion or exclusion, and any other employment terms and entitlements.
- Superannuation Clause: Clearly states how super is calculated and paid (on top of, or included in, the salary), referencing SG compliance.
- Payroll Policy: Details your payroll and super processes, who to contact for questions, and how employees can nominate or change their super fund.
- Privacy Policy: Explains how you handle staff (and customer) data, satisfy privacy law requirements, and keep information secure.
- Modern Awards or EA Compliance: Supporting documents showing you’re applying relevant award conditions (pay, super, leave) for each type of worker.
Don’t forget, each business is unique – so your exact requirements will depend on your industry, employee types, and growth plans. Sprintlaw can help you tailor your employment contracts or privacy policies to ensure compliance.
What Happens If I Make a Mistake With Super?
If you don’t pay the correct super on time:
- You may be required to pay the Superannuation Guarantee Charge (SGC), which includes the unpaid super, interest, and an admin fee (even if you correct the mistake later).
- The ATO may conduct an audit and require back payments with penalties.
- Your employees may lose trust and raise disputes if they notice unpaid super in their superannuation tracker or fund statement.
Mistakes can happen, but the key is to act fast and correct them. Keeping records and seeking advice if you’re unsure is always a good plan.
Key Takeaways
- Calculating superannuation in Australia is a legal requirement for nearly all employees – and the SG rate may change, so keep up-to-date and review your payroll regularly.
- The formula depends on whether you pay super “on top of” or “inclusive of” the employee’s salary package – use the correct calculation in each case.
- Use ATO calculators and payroll software to automate, track and check your super payments for accuracy and compliance.
- Update and clarify employment contracts to show how super is calculated and paid, and include robust payroll policies to protect your business from disputes.
- Staying compliant with super, privacy, and workplace laws builds trust and helps your business grow with confidence.
- If you’re unsure, getting tailored legal advice early can prevent costly mistakes and streamline your payroll setup.
If you would like a consultation on ensuring your business is fully compliant with superannuation laws and payroll obligations, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.
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