• ## Module 4: Calculating super guarantee

### How to calculate super guarantee

The minimum super you must pay each quarter for each eligible employee, to avoid the SG charge is called super guarantee. This is based on the employee's ordinary time earnings multiplied by the current super guarantee rate.

Ordinary time earnings are usually the amounts your employee earns for their ordinary hours of work. It includes things like commissions, shift loadings and allowances, but not overtime payments.

On our website there is a list of payments that are salary or wages and ordinary time earnings to help you identify what payments are considered salary or wages and whether they are part of ordinary time earnings for super guarantee purposes. Remember, super guarantee is calculated on ordinary time earnings and not total salary and wages. When using the checklist, ordinary time earnings is shown in the right-hand column.

To calculate super guarantee, multiply your employee's ordinary time earnings for the quarter by the current super guarantee rate.

The example below is based on the percentage for the financial year in which the employee was paid.

Example: Calculating super guarantee

During the first quarter of 2022–23, Kylie's ordinary time earnings are \$8,000.

Kylie's employer calculates her super guarantee as:

ordinary time earnings × super guarantee rate (\$8,000 × 10.5%) = \$840.

Kylie's employer must contribute at least \$840 to a complying super fund or RSA for Kylie by the due date for the quarter to avoid the super guarantee charge.

End of example

If you make super contributions under an award, check that those contributions meet both the award and super guarantee obligations.

Generally, you can claim a tax deduction for super guarantee payments you make as long as you pay them on time and to the right fund.

You can claim the tax deduction in the same financial year your payment is received by the super fund.

See the due dates in Module 5 (Paying super contributions).

### Amounts included in the calculation

Make sure you understand the following terms as they are needed when calculating super guarantee:

#### Ordinary time earnings

Ordinary time earnings refers to what your employees earn for their ordinary hours of work. Ordinary time earnings include:

• over-award payments
• commissions
• allowances
• bonuses.

The information at this link salary or wages and ordinary time earnings shows various types of payments that employees may receive. It shows whether those payments are considered part of ordinary time earnings.

From 1 January 2020, salary sacrificed super contributions will not reduce ordinary time earnings or count towards the employer's super guarantee contributions. See Salary sacrifice for employees.

#### Ordinary hours

Your employee's ordinary hours will be the normal hours they work, unless their hours are specified in an award or agreement.

If you can't determine the normal hours of work (for example, for casual workers), the actual hours the employee works will be their ordinary hours of work.

Under the Fair Work Act 2009, ordinary hours for workers who are not under an award or agreement is capped at 38 hours. This definition does not override the superannuation laws stated above.

#### Overtime payments

Payments for work performed outside an employee's ordinary hours of work are not ordinary time earnings. This applies even if the:

• payments are calculated at an hourly rate
• payments are calculated as an annualised or lump sum component of a total salary package.

However, if you can't distinctly identify overtime amounts, the hours actually worked will be included in ordinary hours of work.

#### Back pay

You must pay super guarantee on back pay (of salary or wages) even if the employee no longer works for you. If you don't, you'll be liable for the super guarantee charge.

Example: Calculating super guarantee for back pay

On 30 June 2021, Sue finishes her employment with company ZYX.

In September 2021, the company back-pays Sue covering the period from 1 January 2019 to 30 June 2021.

The company pays a super contribution for the back pay by the quarterly due date of 28 October 2021.

The company calculates Sue's super contribution based on the current super guarantee rate. They make the payment into the fund where they paid her last super contribution.

End of example

#### Maximum contribution base

You don't have to pay super guarantee for your employee's earnings above a certain limit. This is called the maximum super contribution base.

For 2022–23, the maximum contributions base is \$60,220 per quarter. This base is indexed annually and is available before the start of each financial year. It does not apply to other mandated contributions, such as contributions you pay under an award.

While the maximum contributions base limits the amount that you have to pay for super guarantee purposes, funds can accept contributions above it. Your employees should be aware that super guarantee contributions count towards their concessional contributions cap in the year the fund receives the contribution.

### Using the super guarantee contributions calculator

You can use the Super guarantee contributions calculator to work out how much super to contribute for your eligible workers.

Using the calculator, you can:

• select the minimum super guarantee rate
• increase the rate based on the arrangement you have with your employees.

The calculator displays your super guarantee calculation. It will provide the:

• sub-total of super guarantee amounts payable to each super fund
• total of all super guarantee contributions payable.

Note: Super guarantee transitional rates apply to Norfolk Island, starting at 1% on 1 July 2016 and increasing 1% yearly to 12% on 1 July 2027. When using the calculator, Norfolk Island employers will need to enter the relevant super guarantee rate. See Norfolk Island tax and super.

#### Activity

Take a few minutes to explore the Super guarantee contributions calculator.

Before you start, you will need the following information:

• the personal details of your employees, including their name (optional) and super fund details (optional)
• the ordinary time earnings amount that super is payable on for each employee for the period.

Work through the example below and attempt the questions to check your understanding of the topics in this module. The examples below are based on the super guarantee rate for the financial year in which the employee was paid.

Example: Calculating super guarantee for an employee

During the first quarter of the financial year 2022–23, Amanda earns:

• ordinary time earnings of \$3,000
• \$200 in overtime payments
• a \$50 bonus relating to overtime only.

You know that Amanda is eligible for super guarantee.

Question 1: How do you work out her super guarantee payment?

A. The same way as any employee eligible for super guarantee: her ordinary time earnings × 10.5%.

B. Pay her an additional 10.5% on top of her usual pay each week and she takes care of the rest.

Question 2: What payments will make up Amanda’s ordinary time earnings?

Use the Checklist: Salary or wages and ordinary time earnings to decide whether you'd answer A, B, C or D below. (Note: ordinary time earnings is shown in the column on the right-hand side of the checklist.):

A. ordinary time earnings of \$3,000

B. \$200 in overtime payments

C. \$50 bonus in respect to overtime only

D. All of the above.

Question 3: How much super guarantee do you need to pay for Amanda?

Use the Super guarantee contributions calculator and then decide which is the correct answer.

A. \$350

B. \$315

The correct answers are available below.

End of example

Question 1: A is correct. Amanda’s super guarantee is calculated as her ordinary time earnings × 10.5%.

Question 2: A is correct. The \$3,000 is ordinary time earnings. The overtime and bonus for overtime are not ordinary time earnings.

Question 3: B is correct. Super guarantee = ordinary time earnings × 10.5% = \$3,000 × 10.5% = \$315.

### Summary of Module 4

Remember, when calculating super guarantee:

• super guarantee equals ordinary time earnings multiplied by the current super guarantee rate
• use the salary or wages and ordinary time earnings checklist to
• check if the salary or wages are considered part of ordinary time earnings for super guarantee purposes

• use the Superannuation guarantee contributions calculator to work out how much super to contribute for your eligible workers.