Who Pays Superannuation in Australia and When?

If you hire people in Australia, superannuation isn’t optional - it’s a core employer obligation. But exactly who pays superannuation, when does it apply, and how do you get it right for different working arrangements?

In this guide, we’ll walk through what you need to pay, when it’s due, and the common grey areas (like contractors, bonuses, overtime and termination). We’ll also share practical steps to set up your onboarding and payroll so you stay compliant without the stress.

What Is Superannuation And Who Pays It?

Superannuation (or “super”) is money set aside for an employee’s retirement. In most cases, you - the employer - must pay a minimum percentage of an employee’s ordinary time earnings (OTE) into their nominated super fund.

In short: the employer pays superannuation. It’s not an amount deducted from the employee’s take-home pay. You calculate it on top of their wages and pay it into a complying super fund by the due dates.

There are a few limited exceptions (explained below), but the default position for Australian businesses is simple - if someone works for you and meets the criteria, you pay super.

When Do You Have To Pay Super (And How Much)?

Super is generally payable for employees and some contractors. Here are the essentials to know so you can set up your payroll correctly from day one.

Current Superannuation Guarantee (SG) Rate

The Superannuation Guarantee rate is 12% of an employee’s ordinary time earnings as at 1 July 2025. The SG rate is set by law and may change over time (usually on 1 July), so make sure your payroll system is updated each year.

What Counts As Ordinary Time Earnings (OTE)?

Super is calculated on OTE - generally, earnings for ordinary hours of work. Overtime payments are usually excluded, but many allowances and most paid leave form part of OTE. Because OTE drives your super calculation, it’s worth double‑checking your inclusions using a clear explanation of Ordinary Time Earnings.

Age And Hours Thresholds

• Employees aged 18 or over: You must pay super regardless of how many hours they work.
• Employees under 18: You must pay super if they work more than 30 hours in a week for you.

The old $450-per-month earnings threshold was removed - so don’t rely on that rule.

Payment Frequency And Due Dates

You must pay super at least quarterly by the 28th day after the end of each quarter (28 Oct, 28 Jan, 28 Apr, 28 Jul). Many employers choose to pay monthly to align with pay cycles and reduce the risk of missing a deadline.

Paying late triggers penalties and paperwork (more on that below), so it’s best to build super payments into your regular payroll routine.

Choice Of Fund And “Stapled” Funds

When onboarding a new employee, offer a standard choice of fund. If the employee doesn’t choose a fund, you must request their “stapled” super fund (the fund linked to them) via the ATO and pay contributions there. Only if no stapled fund exists and there’s no choice provided can you pay into your default fund.

Do You Pay Super On Different Payments?

This is where many businesses trip up. Whether a particular payment attracts super depends on whether it forms part of OTE under the law.

Bonuses And Commissions

Most performance bonuses and commissions are OTE and attract super. If you pay discretionary bonuses, review how they’re structured and recorded. For a deeper dive, see super treatment for bonuses.

Overtime

Genuine overtime payments (for hours worked outside ordinary hours as defined by the relevant award or agreement) are not OTE. Be careful: if your rostered hours include “overtime” as a label but they’re actually ordinary hours under your agreement, they may still be OTE.

Allowances And Loadings

• Most allowances linked to ordinary hours (e.g. a site allowance) are OTE.
• Expense reimbursements that simply repay an employee’s cost (e.g. travel reimbursement with receipts) are not OTE.
• Annual leave is generally OTE; leave loading may be included depending on its purpose and how it’s documented.

Termination Payments

Not all termination-related amounts attract super. For example, accrued annual leave paid out on termination is generally OTE, while some other components are not. It’s smart to check the treatment of specific payments in context, including whether termination payments or payment in lieu of notice attract super in your situation.

“Salary + Super” Versus “Package” Wording

Be clear in your contracts and offers about whether your quoted salary is “plus super” or a “total package” that includes super. It’s a common source of confusion and disputes, so take a moment to clarify this in writing and in payroll settings. For context, here’s a concise explanation of whether salaries include super.

Contractors: Are You Still On The Hook?

Super isn’t just for traditional employees. In many cases you must pay super for contractors too, even if they invoice you and have an ABN.

“Mainly For Labour” Test

If you engage an individual contractor and the contract is wholly or principally for their labour (they’re paid for their personal services, not to deliver a result with substantial tools, materials or employees of their own), the law can treat them like an employee for super purposes. In that case, you must pay SG on their behalf.

Entity Versus Individual Contractors

If you contract with a company or trust (rather than the individual themselves), the SG obligation generally doesn’t apply to you - but be cautious. Substance matters more than form, and sham contracting penalties are significant if you misclassify someone who is, in reality, an employee. It’s worth getting tailored employee/contractor advice if you regularly use contractors or are unsure about your arrangements.

Build The Right Paper Trail

Clear written agreements help demonstrate the true nature of the relationship. If you use contractors for genuine outsourcing, ensure you have a fit‑for‑purpose Contractors Agreement. If they’re employees, lock in an appropriate Employment Contract and pay super accordingly.

Practical Steps To Stay Compliant

Staying on top of super is easier when you bake it into your onboarding, payroll, and record-keeping processes. Here’s a simple framework to follow.

1) Onboard Cleanly

• Collect tax and super forms on day one, including standard choice of fund.
• Request the employee’s stapled fund from the ATO if they don’t choose a fund.
• Confirm whether the role is covered by an award or enterprise agreement, as that drives ordinary hours and overtime settings.
• Make sure the contract specifies whether remuneration is “plus super” or “inclusive” to avoid misunderstandings.

2) Configure Payroll For OTE

• Set the correct SG rate (12%) and OTE inclusions in your payroll software.
• Create clear pay items for overtime vs ordinary hours and for each allowance, so OTE is calculated correctly.
• Align pay cycles with super payment runs (monthly or quarterly) to avoid missing deadlines.

3) Pay Super On Time

• Use a compliant clearing house and schedule payments ahead of each quarterly deadline.
• Reconcile super after each pay run, not at the end of the quarter, so you catch errors early.
• For departing employees, include super treatment when calculating final pay.

4) Keep Records And Review

• Keep records of OTE calculations, contribution amounts, fund details, and payment receipts.
• Review contractors annually to ensure they’re still correctly classified (roles can drift over time).
• Update payroll settings each 1 July for any rate changes.

5) Train Your Team

• Make sure your payroll and HR staff understand what sits inside OTE and what doesn’t.
• Create a quick internal checklist for new starters so fund choice, stapled fund checks, and SG set-up never get missed.

What Happens If You Don’t Pay Super On Time?

If you miss a payment or pay late, you must lodge a Super Guarantee Charge (SGC) statement with the ATO. The SGC includes:

• SG shortfall calculated on a broader base (often less favourable than OTE),
• Interest, and
• An administration fee per employee per quarter.

Importantly, SGC amounts are not tax deductible. Deliberate or repeated non‑compliance can also lead to penalties for the company and potentially for directors. If you realise you’ve underpaid, act quickly - correcting errors early usually leads to better outcomes.

Common Avoidable Mistakes

• Setting and forgetting the SG rate - make a calendar reminder for 1 July each year.
• Mislabelled overtime that is actually ordinary hours under an award or agreement.
• Assuming “they’re on an ABN” means “no super needed” without applying the “mainly for labour” test.
• Confusion over “package includes super” vs “plus super” wording in offers and contracts.

A short internal checklist and good documentation will prevent almost all of these issues.

Frequently Asked Employer Questions

Does Paying Above-Award Or A Salary Change My Super Obligations?

No - you still calculate SG on OTE. Salaries, allowances and most paid leave typically form part of OTE, while genuine overtime does not. Ensure your agreements define ordinary hours clearly and your payroll system mirrors that setup.

Do I Have To Pay Super During Unpaid Leave?

There’s no SG on periods of unpaid leave. If you pay top-ups or special leave that counts as OTE, those amounts may attract super depending on how they’re structured.

What About Super On Redundancy, Termination Or Notice Payments?

Some termination components attract super and others don’t. Check treatment for your specific scenario, including termination payments and payment in lieu of notice, and ensure payroll classifies each line item correctly.

Can I Fix Past Underpayments?

Yes. Identify the shortfall, lodge an SGC statement, and pay the amount due. You should also review your payroll settings and documentation so the error doesn’t recur - for example, clarifying remuneration wording in your Employment Contract and cross‑checking with your payroll categories.

Key Takeaways

• Employers pay superannuation - it’s calculated on top of wages and paid into each employee’s super fund by the due dates.
• The current Superannuation Guarantee rate is 12% of ordinary time earnings; review your payroll settings every 1 July to stay aligned with any changes.
• Most bonuses, commissions and paid leave attract super; genuine overtime typically does not. Confirm the treatment of termination components and notice payments before processing.
• Contractors can trigger SG if the contract is mainly for their labour, even if they invoice you - get classification advice if unsure.
• Onboard cleanly (choice of fund and stapled fund checks), pay at least quarterly, and keep clear records to avoid penalties.
• Be crystal clear in contracts about whether salary is “plus super” or a “package”, and use accurate payroll categories so OTE is calculated correctly. If in doubt about bonuses, termination or packaging, check specific guidance like super on bonuses or salaries that include super.

If you’d like a consultation on employer superannuation obligations for your small business, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no‑obligations chat.