What Counts as Ordinary Time Earnings (OTE) for Super? Complete 2026 Guide
A detailed guide to what payments are included and excluded from ordinary time earnings (OTE) for superannuation guarantee calculations in 2026. Covers base salary, overtime, bonuses, commissions, allowances, leave payments, salary sacrifice, and casual loading with practical examples.
What are ordinary time earnings (OTE)?
Ordinary time earnings (OTE) is the legal term that defines which components of an employee's pay are subject to the 12% Superannuation Guarantee contribution. OTE was first defined in the Superannuation Guarantee (Administration) Act 1992 and refined by Superannuation Guarantee Ruling SGR 2009/2 (now updated). The core principle is straightforward: OTE includes amounts paid to an employee for their ordinary hours of work. This means the regular, expected pay an employee receives for doing their job during standard hours. The distinction matters because total salary and wages can include many components — overtime, expense reimbursements, termination payments — that are not part of OTE and therefore do not attract the SG. Getting OTE wrong has real consequences. If an employer undercalculates OTE and pays insufficient super, they face the Super Guarantee Charge, which is calculated on total salary and wages (a broader, more expensive base) rather than OTE. Conversely, if an employer overcalculates OTE, they are paying more super than legally required — generous for the employee, but an unnecessary cost for the business. For the 2025-26 financial year, the SG rate is 12% of OTE, up to the maximum super contribution base of $65,070 per quarter.
Payments included in OTE
The following payments are included in OTE and attract the 12% super guarantee: Base salary and wages for ordinary hours are the foundation of OTE — this is the gross amount paid for standard contracted hours. Shift loadings for ordinary hours are included, such as afternoon shift loading or weekend penalty rates that form part of the employee's regular roster. Commissions are OTE regardless of whether they are calculated on sales, revenue, or performance targets — they are compensation for work performed during ordinary hours. Performance bonuses and incentive payments related to ordinary hours of work are included. Casual loading is part of OTE — the 25% casual loading compensates for lack of leave entitlements but is still payment for ordinary hours worked. Paid leave — including annual leave, personal/carer's leave, long service leave, and public holiday pay — is OTE because these are payments the employee would have received during ordinary hours. Allowances that are not a reimbursement of expenses and form part of the employee's regular pay are generally OTE — examples include tool allowances, first aid allowances, and industry allowances specified in awards. Director's fees for working directors are also OTE. The ATO uses a substance-over-form approach: if a payment is really for ordinary hours of work, it is OTE regardless of what the employer labels it.
Payments excluded from OTE
Several payment types are specifically excluded from OTE. Overtime payments are the most significant exclusion — any amount paid for hours worked beyond an employee's ordinary hours, including overtime penalty rates, is not OTE. This applies whether overtime is paid at time-and-a-half, double time, or any other rate. Reimbursements for genuine expenses — such as travel costs, phone bills, or equipment purchases — are not OTE because they are not compensation for work performed. Workers' compensation payments made during a period of incapacity are excluded. Termination payments including payment in lieu of notice, redundancy pay, and accrued leave paid out on termination under specific provisions are generally not OTE (though annual leave and long service leave paid out on normal termination may be OTE — this area is complex). Parental leave pay funded by the government through Services Australia is not OTE, though employer-funded parental leave top-up payments may be. Lump sum payments for backdated pay rises can have OTE implications but are assessed based on the nature of the underlying entitlement. The ATO has clarified that genuine expense allowances — where the employee is expected to spend the money on work-related costs — are not OTE, but a flat allowance paid regardless of expenditure is likely OTE.
Bonuses, commissions, and allowances — the grey areas
Bonuses, commissions, and allowances are where OTE classification most commonly trips up employers. The general rule is: if the payment relates to work done during ordinary hours, it is OTE. A quarterly sales commission is OTE because the sales activity occurred during ordinary hours. A Christmas bonus paid to all staff is OTE because it is a reward for work performed during the year. A retention bonus paid for staying employed is OTE. However, a bonus specifically tied to overtime hours worked — such as a production bonus calculated on total hours including overtime — requires apportionment. The portion attributable to ordinary hours is OTE; the portion attributable to overtime is not. Allowances require similar analysis. A flat weekly tool allowance of $30 is OTE because it is paid regardless of whether the employee actually spends that amount on tools. A travel allowance that precisely reimburses actual receipted expenses is not OTE. A car allowance of $500/month paid as part of regular salary is almost certainly OTE. Danger money, disability allowances, and on-call allowances are generally OTE if they are regular and relate to the conditions of ordinary employment. When in doubt, the ATO's position is that payments should be treated as OTE unless they clearly fall within a specific exclusion.
Salary sacrifice and its impact on OTE
Salary sacrifice arrangements require careful OTE treatment. When an employee sacrifices part of their pre-tax salary into super, the employer's SG obligation is calculated on the pre-sacrifice salary — not the reduced take-home amount. This is a critical rule that many employers misunderstand. For example, if an employee has a gross salary of $100,000 and salary sacrifices $10,000 into super, the employer must still pay 12% SG on the full $100,000 ($12,000 in super contributions). The $10,000 sacrifice is an additional contribution on top of the employer's SG obligation, not a substitute for it. Salary sacrifice into non-super benefits — such as a novated car lease, additional leave, or laptop — similarly does not reduce the OTE base. The employee's notional pre-sacrifice earnings remain the OTE figure. This principle was confirmed by the Full Federal Court in Commissioner of Taxation v Bupa and reinforced by updated ATO guidance. Employers who incorrectly calculate SG on post-sacrifice salary are underpaying super and will be liable for the SGC. The only exception is where an individual employment contract explicitly defines OTE to include salary sacrifice reductions — but even then, the SG Act overrides contractual definitions if they result in a lower contribution than the statutory minimum.
OTE for casual and part-time employees
Casual employees present a specific OTE consideration because their pay structure differs from permanent employees. For casuals, OTE includes the casual loading — typically 25% under most modern awards. This means if a casual employee earns a base rate of $30/hour plus a 25% casual loading ($7.50/hour), the full $37.50/hour is OTE and attracts the 12% SG. The casual loading is not treated as a penalty rate or overtime component; it is compensation for ordinary hours worked, paid in lieu of leave entitlements. For part-time employees, OTE is their contracted hours at their ordinary rate of pay, including any applicable shift loadings for those contracted hours. If a part-time employee works additional hours beyond their contracted ordinary hours but below the full-time threshold, those hours are still ordinary hours and the pay is OTE — they are not overtime unless they exceed the relevant award's overtime trigger. If a part-time employee works beyond the full-time hours threshold and triggers overtime under their award, those additional payments are not OTE. This distinction is important: a part-time employee contracted for 20 hours who works 30 hours is not necessarily working overtime — check the applicable award for when overtime actually triggers.
How to calculate super on OTE — worked examples
Let us work through a practical example. Sarah is a full-time marketing manager earning $95,000 base salary, plus a $5,000 annual performance bonus, a $200/month car allowance, and occasional overtime. Her OTE calculation: base salary ($95,000) plus performance bonus ($5,000) plus car allowance ($2,400/year) equals $102,400 in annual OTE. Overtime is excluded. Her employer owes 12% of $102,400 = $12,288 in annual SG contributions. Under payday super (from 1 July 2026), this must be paid each pay cycle. If Sarah is paid fortnightly, each contribution is $102,400 / 26 fortnights x 12% = $472.62 per fortnight. Now consider Jake, a casual barista earning $28.26/hour base plus 25% casual loading ($7.07/hour) = $35.33/hour total. He works 20 hours per week. His weekly OTE is $35.33 x 20 = $706.60, and his weekly super is $706.60 x 12% = $84.79. If Jake works a 6-hour overtime shift at time-and-a-half ($42.39/hour), that $254.34 is not OTE and no super is payable on it. Use our Superannuation Calculator to run your own figures — input your gross pay and it will separate OTE from non-OTE components automatically.
Try these free tools
Official resources
General information and estimates only — not legal, financial, or tax advice. Always verify with the Fair Work Ombudsman (13 13 94) or a qualified professional.
Related articles
The ATO super guarantee rate for 2025-26 is 12% of your ordinary time earnings. Use our free calculator to check your employer is paying the right amount. Quarterly deadlines, OTE rules, max contribution base ($65,070/qtr), and what to do if super is missing.
Minimum Wage Australia 2026: $24.10 Per Hour — Current Rate & Casual LoadingAustralia's national minimum wage is $24.10/hr ($915.90/week) for 2025-26. Casual rate with 25% loading: $30.13/hr. Free calculator to check if you're being underpaid.
Penalty Rates Australia 2026: Saturday, Sunday & Public Holiday RatesWhat are your weekend and public holiday penalty rates? Lookup by award — retail, hospitality, fast food & more. Free calculator shows exactly what you should earn per hour.