Paying bonuses is a great way to reward and retain your team - but it also raises a common question for payroll and HR: do you have to pay superannuation on bonus payments in Australia?
In most cases, yes. Superannuation generally applies to bonuses because they count towards an employee’s ordinary time earnings (OTE). Getting this right matters: super errors add up quickly and can attract costly penalties.
In this guide, we’ll walk through when super is payable on bonuses, how to calculate it at today’s Super Guarantee (SG) rate, special scenarios (like retention or overtime-only bonuses), and practical steps to stay compliant. We’ll keep it simple and action‑focused, so you can pay bonuses confidently and focus on growing your business.
What Is a Bonus and When Does Super Apply?
A bonus is any additional payment you make to an employee on top of their usual salary or wages. It might be tied to performance, hitting KPIs, sales results, retention, or a once‑off “spot” bonus.
In Australia, employers must pay superannuation for eligible employees on their ordinary time earnings (OTE). As a general rule, bonuses are part of OTE if they are paid in respect of ordinary hours of work. That’s why, in most situations, super is payable on bonus payments.
If you’re new to the concept of OTE, it’s worth getting across the basics of ordinary time earnings and how they drive your super calculations.
Bonuses that typically attract super
- Annual or performance bonuses linked to KPIs or overall results.
- Commission bonuses where employees earn a commission for sales or similar achievements.
- Retention bonuses paid to encourage employees to remain with the business.
- Sign‑on bonuses offered to secure critical hires.
- Discretionary spot bonuses that reward contribution during ordinary hours.
When a bonus may not attract super
The main exception is where a bonus solely and specifically relates to overtime (work outside ordinary hours). If the payment is genuinely for overtime only - and your records and wording make that clear - it may fall outside OTE. Be cautious here: most bonuses relate at least in part to ordinary hours, so the overtime exception is narrow.
It’s also useful to understand where super applies in other grey areas, such as termination payments. For example, the rules differ for payment in lieu of notice and superannuation, so check the nature of the payment before you process it.
Is Super Included In the Bonus, Or Paid On Top?
This is a key point for payroll clarity and employee expectations. In Australia, super is usually paid on top of the advertised bonus amount, unless the contract clearly states the bonus is “inclusive of super”.
- “Plus super” approach: If you promise a $5,000 bonus, you generally pay $5,000 (pre‑tax) to the employee and also contribute the super amount to their fund.
- “Inclusive of super” approach: If your contract states “$5,000 including super”, you must carve out the super component from that total and pay only the balance to the employee.
Clarity in your documentation avoids disputes. Set out how bonuses work in your Employment Contract and internal policies, including whether bonuses are inclusive or exclusive of super, and whether they’re discretionary, criteria‑based, or guaranteed under certain conditions.
How To Calculate Super On Bonuses (With Examples)
The Super Guarantee rate is 11.5% for the 2024–25 financial year. It’s legislated to increase to 12% from 1 July 2025. To calculate super on a bonus that forms part of OTE, multiply the gross (before‑tax) bonus by the SG rate applicable for that period.
Your employee earns a $4,000 annual performance bonus (not overtime‑only). At 11.5% SG, you must contribute $460 to their super fund (in addition to paying the $4,000 bonus to the employee).
Example 2: Retention bonus
You pay a $10,000 retention bonus for completing a 12‑month service milestone. This is ordinarily OTE. At 11.5% SG, the super contribution is $1,150, paid into the employee’s fund.
Example 3: “Overtime‑only” bonus
If a bonus is expressly and solely for overtime hours, it may be excluded from OTE. However, if any part of the bonus relates to ordinary hours (for example, “recognising the team’s overall effort during the quarter”), super will generally be payable on the full amount. Wording and records matter here.
If you’re unsure whether a particular bonus is OTE, cross‑check the role’s ordinary hours under the applicable award or enterprise agreement and the employee’s contract. You can also review your broader OTE settings against this OTE guide for employers.
Practical Steps To Stay Compliant
Superannuation mistakes often show up during ATO reviews or after an employee queries their entitlements. These steps help you get it right first time.
1) Lock down your contracts and policies
- Spell out how bonuses work (discretionary vs guaranteed, criteria used, timing) and whether they are inclusive or exclusive of super.
- Confirm the employee’s ordinary hours, which drives whether a payment is OTE.
- Keep your workplace policies consistent with your contracts.
2) Check awards and enterprise agreements
If your employee is covered by a Modern Award or an enterprise agreement, check any bonus‑related rules. When in doubt, review your obligations around Modern Awards or seek help with award compliance before you run a bonus cycle.
3) Identify any overtime‑only payments
Be precise about whether a payment is genuinely for overtime only. If not, assume it’s OTE. Keep clear notes and descriptors in your payroll system to show why super was or wasn’t paid.
4) Calculate SG on the gross bonus
Use the correct SG rate for the relevant period and apply it to the full bonus amount (unless the bonus is overtime‑only). If you use “inclusive of super” wording, calculate the super component first, then pay the net to the employee.
5) Pay by the quarterly due dates
Super must be paid to the employee’s fund by the legislated due dates each quarter. Paying late triggers the Superannuation Guarantee Charge (SGC), which is more expensive than the super you should have paid on time.
6) Keep complete records
Maintain contracts, policies, award references, payroll reports and calculation worksheets for each bonus cycle. This evidence is critical if questions arise later.
7) Get help for edge cases
If you have complex incentive schemes, mixed ordinary/overtime patterns or unusual bonus wording, it’s sensible to speak with an employment lawyer or your accountant before finalising your approach.
What happens if you get it wrong?
If you underpay or pay late, you may face the Superannuation Guarantee Charge (which includes a shortfall amount, interest and administration fees), and it generally isn’t tax‑deductible. The ATO can also seek additional penalties. In practice, underpayments can be recoverable for long periods and compound quickly, so it’s best to fix issues proactively and keep everything current.
Special Scenarios Employers Ask About
Bonuses come in many shapes and sizes. Here’s how common scenarios usually work for super.
Retention bonuses
Retention bonuses are typically OTE because they reward service (remaining employed over a period). Unless it is expressly and solely for overtime, expect to pay super at the current SG rate.
Commission schemes
Commission‑based payments tied to ordinary hours generally form part of OTE. If you run commission plans, ensure your scheme documents and any Employee Commission Agreement explain how super applies to each component, and that payroll codes align with your intent.
Sign‑on bonuses
Sign‑on bonuses are usually OTE because they relate to service and the employment relationship rather than overtime. Include super unless the payment is overtime‑only (which is rare for sign‑on incentives).
Overtime‑only bonuses
If a bonus is genuinely and solely for overtime, it may be excluded from OTE. Take care with the wording and evidence. If the payment is partly for ordinary hours (for example, a general “thank you” for a busy period), it will usually attract super on the whole amount.
“Inclusive of super” language
“Inclusive of super” is permitted but requires careful calculation and clear communication. Document it in your Employment Contract and ensure payroll handles the carve‑out correctly to avoid underpayments.
Bonuses at termination
Whether super applies to a bonus paid on or around termination depends on what the payment is for. Some termination‑related payments are not OTE, while others are. Compare the nature of the payment against rules for OTE and specific payments like payment in lieu of notice, then adjust your super treatment accordingly.
Contractors vs employees
Super obligations may also apply to some contractors who are paid wholly or principally for their labour. If you engage contractors on incentive arrangements, consider whether they fall under the super rules and whether the incentive is OTE‑like for super purposes. When in doubt, seek advice before you pay.
Key Takeaways
- Most bonuses in Australia attract superannuation because they’re part of ordinary time earnings, unless a payment is solely for overtime.
- For 2024–25, calculate super at 11.5% on the gross bonus amount and pay it to the employee’s super fund by the quarterly due dates.
- Make it clear in your documents whether bonuses are “plus super” or “inclusive of super”, and align your contracts, policies and payroll codes.
- Use precise wording for any overtime‑only bonus and keep strong records to support your OTE treatment.
- Check awards and agreements for bonus rules, review your approach against OTE requirements, and get help with award compliance if needed.
- If you’re unsure, it’s smart to speak with an employment lawyer and your accountant before running a bonus cycle.
If you’d like a consultation on superannuation and bonus compliance, or need help updating your Employment Contracts and policies, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no‑obligations chat.
