Is super paid on bonuses?

Does your employer have to pay super on any bonuses you earn? It’s an important question for eligible employees who work in sales or have performance targets set by their employers, because a significant part of their pay may be comprised of bonuses.

The answer, for the most part is, yes, but there is a situation in which employers are not required to pay super on bonuses.

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.

Bonuses can be paid for a range of reasons, usually at the discretion of your employer, but they can also be an integral part of an employment contract. Some common ways to earn bonuses include:

• Meeting performance or sales benchmarks;
• As an incentive to stay with an employer (retention bonus);
• As an enticement to start working for an employer (sign-on bonus);
• As an end-of-year reward (annual or Christmas bonus).

Was the bonus earned during ‘normal’ work hours?

Whether your employer is required to pay super on the money you receive as a bonus depends on whether you have earned the bonus during your normal hours of work.

Under the terms of Australia’s Superannuation Guarantee, employers must pay a minimum 10% of an employee’s ordinary time earnings (OTE) into their nominated superannuation account. Employers can choose to pay more if they wish.

OTE means the money you would earn during your designated work hours. That includes things such as leave loading, shift allowances, back pay, commissions, and bonuses.¹

So, if you have earned your bonus because of the work you have done during those regular hours, your employer must also pay a minimum of 10% of that amount into your designated super fund.

An exception to the payment of super on bonuses

However, the same does not apply if you are being paid a bonus for work you have done wholly during overtime hours.

Employers are not required to pay super on any overtime worked. It follows, then, that your employer is not required to pay super on a bonus that has been earned from work done during that overtime.²

A super strategy

Bonuses, even if they are earned during overtime hours, present an opportunity to grow your super balance.

While bonuses calculated on sales targets or revenue numbers can sometimes be anticipated to form a large part of a person’s pay, other bonuses (Christmas bonus, sign-on bonus) may offer the opportunity to boost your retirement fund.

Money earned from an anticipated bonus could possibly allow you to salary sacrifice, some of your regular income, 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 has the additional benefit of reducing the amount of income tax you pay.

Another option is to make after-tax voluntary contributions to your super account. 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 (known as contribution caps). If you go above these limits, you may pay extra tax.

Other strategies for growing your super can be found here.

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1. Australian Tax Office, https://www.ato.gov.au/business/super-for-employers/how-much-to-pay/checklist--salary-or-wages-and-ordinary-time-earnings/, accessed 15 October, 2020.
2. https://www.ato.gov.au/business/super-for-employers/how-much-to-pay/checklist--salary-or-wages-and-ordinary-time-earnings/#allowances, accessed 10 August 2020.
* QInvest Limited (ABN 35 063 511 580, AFSL 238274) is a separate legal entity responsible for the financial services it provides. The administration fee covers the provision of advice about your QSuper Accumulation and/or Income account, when you receive personal advice from QInvest. Eligibility conditions and advice fees may apply. Refer to the Financial Services Guide for more information.