Watch those super calculations

Dated: April 2008

Employers need to check the earnings base used in calculating superannuation guarantee contributions.

If you use an earnings base other than ordinary time earnings to calculate superannuation guarantee contributions, you must start using ordinary time earnings for all employees from 1 July 2008.

Ordinary time earnings as defined in the superannuation guarantee legislation is generally what an employee earns for ordinary hours of work including over-award payments, shift loading or commissions. It excludes such things as overtime.

For more information on what is included or excluded from ordinary time earnings see the Checklist for salary or wages and ordinary time earnings on the ATO's website.

WHAT IS AN EARNINGS BASE?
Most employees have ordinary time earnings as their earnings base, however some have another earnings base that may be contained in:

• an industrial award
• an existing agreement they have with their employer
• a fund’s trust deed, or
• a law.

WHY THE CHANGE?
Some employers currently pay superannuation on an earnings base from a source that was permitted when the superannuation guarantee legislation was introduced. This means an employee may be paid lower superannuation contributions (as a proportion of total remuneration) when compared with another employee in similar circumstances.

The new law standardises the earnings base to ordinary time earnings for all employees.

Bonuses are often paid by employers in a number of industries. However, many industries do not include bonuses when calculating the super guarantee. From 1 July 2008, there is a requirement under super guarantee law for the super guarantee to be paid on bonuses.

EXAMPLE Real estate companies may pay super contributions under an award which states that commission for salespersons is excluded from ordinary time earnings as defined in the relevant award. From 1 July 2008, commission must be included when calculating super guarantee contributions.