How Australian pension contributions work in payroll
Reviewed by Mellow Editorial Team, HR & payroll content team
Superannuation is a compulsory employer contribution of 12% of each eligible employee's ordinary time earnings, paid to a complying superannuation fund on a regular schedule. Here is how the full process works in practice.
Who is eligible
Most employees are entitled to superannuation contributions, regardless of how many hours they work or how much they earn. This includes full-time, part-time and casual workers. Contractors who are primarily paid for their labour — rather than a result — may also qualify, depending on how the arrangement is structured.
Employees under 18 are only entitled to super if they work more than 30 hours in a week. There is no minimum earnings threshold — the 2024/25 removal of the previous $450 monthly floor means even low-earning workers must receive contributions.
What counts as ordinary time earnings
The 12% rate applies to ordinary time earnings (OTE), not total remuneration. OTE generally means wages and salary for ordinary hours, plus some allowances and certain bonuses. It does not include overtime payments, reimbursements, or redundancy pay.
Getting this base right matters. Under-calculating OTE — for example, by applying super only to base salary and excluding regular allowances that qualify — can result in a superannuation guarantee shortfall and trigger the Superannuation Guarantee Charge, which is not tax-deductible.
When contributions must be paid
Contributions must reach the employee's fund at least quarterly, by specific due dates: 28 October, 28 January, 28 April and 28 July. Many employers choose to pay more frequently — monthly or with each payroll run — which reduces the risk of falling short at quarter end and is generally better for cash flow planning.
The legal obligation is for the contribution to be received by the fund by the due date, not merely processed by you. Allow time for the payment to clear, particularly when using clearing houses.
The ATO's Small Business Superannuation Clearing House (SBSCH) is available to employers with 19 or fewer employees. Payments sent to the SBSCH by the due date are treated as received on that date for compliance purposes. Larger employers typically use a commercial clearing house or pay funds directly.
How super interacts with the rest of payroll
Superannuation sits alongside several other payroll obligations that all run in parallel.
PAYG withholding. Income tax is withheld from each pay event under the pay-as-you-go system, using progressive tax rates and the ATO's tax tables. Employer super contributions are on top of gross wages — they do not reduce the employee's taxable income at the payroll stage (though they are a deductible expense for the employer).
Medicare levy. A 2% Medicare levy is included in the PAYG withholding calculation. You do not need to handle it separately — it is embedded in the withholding amounts.
HECS/HELP repayments. If an employee has a study debt, you must withhold additional amounts based on their repayment income, using the ATO's banded repayment rates. This is separate from super and does not affect the OTE calculation.
Single Touch Payroll reporting. Under STP, you report each employee's gross wages, PAYG withheld and superannuation liability to the ATO at every pay event — not at the end of the year. This gives the ATO near-real-time visibility. You then finalise payroll by 14 July each year, which triggers employees' income statements becoming tax-ready in myGov.
Note that STP reports the super liability as it accrues, but the ATO does not assume contributions have been paid on that basis. Actual payment compliance is tracked separately through the quarterly due dates.
Fund choice and your default fund obligations
Most employees have the right to choose which super fund receives their contributions. When someone starts, you must provide them with a Standard Choice Form. If they do not return a choice, you must check whether they have an existing stapled fund via the ATO — a stapled fund is a super account already linked to that individual from previous employment.
Only if there is no stapled fund do you default the employee to your employer-nominated default fund, which must be a complying fund (typically a MySuper-authorised product).
Paying into the wrong fund — or continuing to pay into your default when an employee has a stapled fund — can still satisfy your SG obligation, but creates administrative work to unwind and may frustrate the employee.
Keeping up with rate changes
The Superannuation Guarantee rate reached 12% on 1 July 2025 and is legislated to remain at that level. There are no further scheduled increases at this stage, so 12% is the rate that applies for the current 2026/27 tax year. Update your payroll software each time the rate changes and check that salary package agreements specify whether super is included in or on top of the quoted amount — the treatment is different and disputes are common.
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