Superannuation – What do I have to pay?

Public news

One of the most common questions the MTA Workplace Relations Department has been receiving of late is “Is superannuation payable?”

The question of employer superannuation contributions arises in a variety of situations. Whether it’s in the context of outstanding leave payments paid out on termination of employment, or when an employee is on paid leave, whether payable on bonuses or loadings, or when workers’ compensation payments are being made, it can be confusing.

In order to assist members with some of the answers, we have prepared a quick and easy guide which can be used to answer the question “Is super payable?”

Does the employee earn enough to qualify for super payments?

The first question you need to ask in determining whether superannuation is payable to an employee is how much does the employee earn?

While there are some exceptions such as domestic or private workers or foreign workers covered by an international agreement, the general rule is that if an employee earns $450.00 or more in a calendar month, then you are required to pay superannuation in relation to the employee’s ordinary time earnings (OTE). An explanation of what payments are included in OTE’s is set out on the next page.

Are they an employee?

Once we’ve determined that someone has earned $450 or more in a calendar month, the next step is to figure out whether they are categorised as an ‘employee’ for the purposes of the relevant superannuation legislation and are therefore entitled to superannuation payments.

This question is not as straightforward as it seems because the Superannuation Guarantee (Administration) Act 1992 (Cth) has an expanded definition of ‘employee’ which states:

“If a person works under a contract that is wholly or principally for the labour of the person, the person is an employee of the other party to the contract.”

This means that some independent contractors are entitled to be paid superannuation, even where they have provided you with their own ABN. This is a common mistake in relation to the payment of superannuation and can be costly to an employer.

For MTA members, generally, a contractor who is wholly or principally performing work for you personally, for example, a panel beater, spray painter, auto electrician etc. will be entitled to superannuation payments. However if the contractor is performing a service that is not based upon their labour e.g. providing digital tune files, towing vehicles or sourcing spare parts, then they are not entitled to superannuation payments. If unsure, contact the MTA to discuss it further.

A non-working director or owner is not an employee and is not entitled to superannuation payments.

Which payments are Ordinary Time Earnings?

Superannuation is only payable on earnings which constitute an employee’s ‘ordinary time earnings’ (OTE). Determining what constitutes OTE’s can be complicated as the rules can change depending on taxation legislation and rulings by the ATO. Essentially, OTE’s are earnings in respect of ordinary hours of work, for example, part of the 38 ordinary hours in a week, including paid leave entitlements that are based on an employee’s ordinary hours of work.

To help MTA members, we have put together a few dot points below that shows what earnings are classified as OTE’s and when superannuation is and is not payable. The information below is current as at 22 February 2017.

More information can be found by clicking here and accessing the ATO’s website.

Superannuation is payable on the following:

  • Shift loadings, in relation to ordinary hours
  • Casual loading payments under an award.
  • Work-related allowances, for example, first-aid allowance, leading hand allowance but not allowances that are a reimbursement of expenses
  • Workers’ compensation payments where work is performed.
  • Workers’ compensation payments where no work is performed (for the first 12 months).
  • Annual leave
  • Long service leave
  • Paid compassionate leave
  • Personal/carer’s leave
  • Payment in lieu of notice upon termination
  • Bonuses where linked to performance during ordinary hours
  • Over award payments for ordinary hours
  • Superannuation is not payable on the following:

  • Overtime payments
  • The reimbursement of expenses, for example, tool allowance, meal allowance, fuel re-imbursements
  • Court ordered damages, for example, unfair dismissal payments
  • Workers’ compensation payments where no work is performed (after the first 12 months of incapacity)
  • Parental leave
  • Other leave, for example, jury service leave, compassionate leave (unpaid)
  • Payment for unused annual leave or long service leave upon termination/resignation
  • Redundancy payments
  • Hopefully this clears up some of the confusion surrounding superannuation payments. If you are still unsure of your obligations after reading the above, please be sure to contact the Workplace Relations team by emailing us by clicking here.