Superannuation - What type of wages/earning should it be paid on

Whether your an employee or an employer working out when and what to pay superannuation on in Australia is not always straightforward.

Naturally it should be paid on your ordinary time earnings but what exactly is your ordinary time earnings? what about everything else you get paid ?

To break down the complex Superannuation Guarantee Ruling 2009/2 available from the Australian Tax Office - here are some of the more common situations.

Ordinary time earnings - is defined as earnings in respect of ordinary hours of work. Ordinary Hours is defined as the hours defined under an award or agreement that are considered normal or ordinary in that they do no attract a higher rate of pay such as overtime.

Casual Loading - The extra percentage a casual employee gets over a permanent employee for performing ordinary hours is included for the purposes of paying superannuation when it is paid on on ordinary hour. If a casual performs overtime - then the casual loading is not included as the hours being performed is not ordinary.

Paid Leave and Holiday Pay - When an employee takes paid leave away from the workplace this is still considered ordinary time earnings for the purposes of superannuation. So Superannuation should still be paid on this even if the employee is not at work.

There is an importance difference for superannuation purposes between taking leave and being paid while your absent from the workplace and being paid a lump sum in lieu of leave.

Overtime - As alluded to above is when an employee is paid overtime rates for hours outside their ordinary hours - this is not considered Ordinary Time Earnings and therefore superannuation is not applicable.

Of course these are simplistic explanations and the terms and information above cannot comprehensively cover every situation - for examples packaged salaries where overtime is not paid as it is part of the package. If you would like more advanced information specific to your situation - please contact us at Burgess Group Services for tailored advice.

[Source: Australian Tax Office Legal Dasabase

https://www.ato.gov.au/law/view/view.htm?docid=sgr/sgr20092/nat/ato/00001&pit=99991231235958]