From 1 July 2008, ordinary time earnings (OTE) as defined in the super guarantee law must be used to calculate all super contributions for employees. Some employers currently pay super on an earnings base from a source that was permitted when the super guarantee law was introduced. This means an employee may be paid lower super contributions (as a proportion of total remuneration) when compared with another employee in similar circumstances. Most employees have OTE as their earnings base. However, some have another earnings base that may be contained in an industrial award or an existing agreement they have with their employer. These earnings bases can only be used until 30 June 2008. From 1 July 2008, OTE must be used.

The new law standardises the earnings base to OTE for all employees and ensures everyone is treated equally.


What are ordinary time earnings (OTE)?

OTE as defined in the super guarantee law is generally what an employee earns for ordinary hours of work including over-award payments, shift loading and commissions. Overtime is not included in OTE. Detailed information about what is included or excluded from OTE is available from the Australian Tax Office (ATO).


How does it work?

An example from the ATO: Motor vehicle company XYZ has been paying super contributions under an award for its employees which states that commission for salespersons is excluded from ordinary time earnings as defined in the relevant award. However, from 1 July 2008, motor vehicle company XYZ must include commission for its salespersons when calculating super guarantee contributions.



Review the earnings base for all your employees to ensure you are calculating their super contributions based on OTE.

YOU WON'T NEED TO CHANGE IF: You currently calculate all your employees' superannuation guarantee contributions at 9% of OTE.

YOU WILL NEED TO CHANGE IF: Any of your employees receive a super guarantee contribution that is not 9% of OTE. Now is the time to update software and payroll systems to incorporate any changes that need to be made. If necessary, inform your employees of possible changes to their super contributions.

Modified: 29/05/2008 14:27 by Gandalf - Categorized as: Superannuation

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