A common question HR Expert receives is in regards to paying superannuation on bonus payments. So should organisations be paying superannuation on bonus payments? Well, in most cases, the answer is yes. Where the bonus is categorised as ordinary time earnings, the bonus payments can have an impact on the assessment of payments for superannuation.
For employees with straightforward terms and conditions of employment, working out ordinary time earnings should be simple. But for more complex salary arrangements – with loadings, allowances or commissions for example – working out ordinary time earnings becomes a little more involved.
What is ordinary time earnings (OTE)?
You must use ordinary time earnings (OTE) to calculate the minimum super guarantee contributions for your eligible employees.
OTE is generally what your employees earn for their ordinary hours of work. It includes things like commissions, performance bonuses, shift loadings and allowances, but not overtime payments.
As a guide, the following table will help you identify what payments are considered salary or wages and if you should be paying superannuation on bonus payments as they may be considered part of ordinary time earnings (OTE) for super guarantee purposes. The list is not exhaustive and is for general guidance only:
| Bonus Payment | Salary or wages | Ordinary time earnings (OTE) |
| Performance bonus | Yes | Yes |
| Sales incentive bonus | Yes | Yes |
| Bonus labelled as ex-gratia but in respect of ordinary hours of work | Yes | Yes |
| Christmas bonus | Yes | Yes |
| Bonus in respect of overtime only | Yes | No |
What is the minimum super guarantee?
Super is money you pay for your workers to provide for their retirement. Generally, if you pay an employee $450 or more before tax in a calendar month, you have to pay super on top of their wages. The minimum you must pay is called the super guarantee (SG), which is currently 9.5% of an employee’s ordinary time earnings.
Is there a maximum super guarantee?
It is important to note that, yes, there is a maximum guarantee also. The maximum superannuation contribution base is used to determine the maximum Superannuation Guarantee (SG) contributions that an employer is required to make under the super laws.
2018/2019 year: The maximum superannuation contribution base (MSCB) for the 2018/2019 year is $54,030 per quarter (entitlement is assessed quarterly), or the equivalent of $216,120 annually. Therefore, if OTE surpass the MSCB, you are not obliged to pay superannuation on any amounts greater than the cap.
More information:
This information is for general guidance only and should not be relied upon. For more detailed information, please call the Australian Taxation Office (ATO) on 13 10 20 or go to ato.gov.au.
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