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Does your employer have to pay super on any overtime you’ve worked? It’s a common question, especially for workers who receive overtime payments.
The short answer is no – but it’s worth having a thorough understanding of how your pay is made up because super must be paid on just about everything else, including commissions, leave loading, back pay and bonuses.1
It is important to note, however, that some employers, including the Queensland Government, have different contribution arrangements and, in those cases, employer obligations may differ from those outlined here.
Many professions give people the opportunity to work overtime, which can boost their take-home pay significantly.
Nurses, police officers, and corrections staff are among those often relied upon to work more than their contracted hours.
But, generally, your employer is not required to pay superannuation on the portion of your pay earned from working overtime.
At the centre of Australia’s super system sits the Superannuation Guarantee, which stipulates that employers must pay a minimum 9.5% of an employee’s ordinary time earnings (OTE) into their designated superannuation account.
OTE means the money you would earn during normal work hours. Overtime, even if it is regular, frequent or bundled up into a salary package, is not considered to be OTE.
Many other things are though, including:
The Australian Tax Office has a comprehensive checklist of what is deemed to be OTE here.
Knowing how your wages are made up allows you to monitor whether you are receiving all of your super entitlements.
And while the amount of overtime you earn is not reflected in the sum your employer contributes to your super account, there are still opportunities to use that extra money to grow your retirement nest egg.
Money earned from working overtime could possibly allow you to salary sacrifice voluntary contributions, which can be a tax-effective way of saving for the future.
This means paying money into your super from your before-tax salary, which may have the additional bonus of reducing the amount of income tax you pay.
Another option is to make periodic after-tax voluntary contributions to your super account from overtime earned. Also known as non-concessional or personal contributions, these after-tax payments can be made up until the age of 75 – although after age 67 there are some restrictions and conditions that apply. See our Personal Contributions Guide for more information.
Even small amounts paid regularly into super this way can have an impact on your retirement balance when it comes time to wind down your working life. It is important to be aware that there are some limits to how much you can contribute to your super fund each year (contribution caps). If you go above these limits, you may pay extra tax.
Other ways to grow your super include government assistance for lower income earners while other contribution opportunities are outlined here.
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1. Australian Tax Office, accessed 28 July 2020
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