A payroll file can withhold PAYG correctly, lodge every Single Touch Payroll event, and still underpay super. The Super Guarantee is not 12 per cent of whatever hit the bank. From 1 July 2025 it is 12 per cent of ordinary time earnings, subject to the maximum contribution base the ATO publishes for the year.

That sentence is where Australian bookkeeping either becomes a craft or becomes a quarterly apology. This essay is the craft: what usually sits inside OTE, what usually does not, how commissions and allowances behave, and how the ledger should make the 12 per cent checkable. It is not a substitute for the ATO’s current OTE guidance or for the award. Those two documents win every argument.

Start with ordinary hours, not with “wages”

Ordinary time earnings are the earnings for ordinary hours of work, plus some amounts that are in the nature of ordinary pay. They are not “everything except the kitchen”. They are also not “the taxable gross”. Taxable gross and OTE part company the moment you pay overtime, some allowances, unused leave on termination, or a bonus that is not for ordinary work.

Write down, for each employee, what the award or registered agreement calls ordinary hours. A café part-timer whose ordinary hours are the rostered shifts is a different animal from a construction worker whose ordinary hours are named in the award and whose Saturday looks like overtime even when it happens every week.

If you cannot name ordinary hours, you cannot name OTE. Software will still calculate a super line. It will calculate it on whatever pay items you ticked “superable” during setup on a Sunday. That is not a reading of the Superannuation Guarantee (Administration) Act. It is a tick.

Keep ordinary wages in their own account, overtime in another, and allowances split so you can see which ones you treated as OTE. The chart of accounts essay is the companion. The payroll hub is the shelf.

Overtime is usually out — and “extra hours” is not a synonym

Overtime payments for work outside ordinary hours are generally not OTE. That is the rule bookkeepers remember, and it is the rule they misapply.

The mistake is calling every hour above a hoped-for 38 “overtime” because that is how the owner talks. If the award or contract treats those hours as ordinary — a salaried manager whose salary already covers a reasonable additional hours clause, a part-timer whose agreed hours this fortnight are 28 and who worked 28 — you may be looking at ordinary pay, not overtime.

The other mistake is the reverse: paying a loading or a higher rate for Saturday and then including it in OTE because “they always work Saturday”. Frequency does not turn overtime into ordinary time. The instrument does.

Do not invent penalty rates. Read the award. If the file has no award assigned because “we just pay above”, you still need a written statement of ordinary hours and of what the extra rate is for. A Fair Work inspector and a super auditor will both ask. Casual loading is the related conversation when the extra is a casual loading rather than a penalty.

Commissions, bonuses and the “is this ordinary?” test

Commissions on sales made in the ordinary course of the job are generally OTE. A real-estate commission, a clinic bonus tied to ordinary hours of consulting, a trade salesperson’s monthly commission on the book they already service — those usually sit inside the base.

A one-off bonus for a result that is not ordinary work is where files go vague. Christmas gifts, a discretionary “good year” payment, a sign-on amount, a retention bonus paid to stop someone leaving: do not guess. Read the current ATO OTE page for bonuses and, if the amount is material, ask the tax agent before you tick superable. We would rather a short email than a Super Guarantee charge later.

Piece rates and output-based pay for ordinary hours generally belong in OTE. Piece rates for work that is overtime generally do not. Again, ordinary hours are the hinge.

Directors’ fees are their own animal. If the director is also an employee and the fee is for employment, treat it with care and document the decision. Do not bury directors’ fees inside “wages” and then apply 12 per cent by habit. STP Phase 2 wants the income type named; the super decision wants the same honesty.

Allowances: some in, some out, none invented

Allowances related to ordinary hours of work — a tool allowance paid because the person supplies tools for the ordinary job, a disability allowance paid for ordinary duties — are often OTE. Allowances that reimburse a specific expense, overtime meal allowances, and some travel amounts are often not.

That “often” is doing a lot of work, and it is why we will not print a table of dollar figures. The ATO’s reasonable amounts and the award’s allowance clauses change. A bookkeeper who copies last year’s laundry figure into this year’s pay item is inventing a rate. Check the current ATO page. Check the award. Write the conclusion on the pay item.

A practical test we use at the desk:

  • If the allowance is in the nature of extra ordinary pay, start from “probably OTE” and disprove it.
  • If the allowance is in the nature of a reimbursement or an overtime adjunct, start from “probably not OTE” and disprove it.
  • If you cannot tell, do not tick the box to make the super report look tidy. Park it, ask, then code.

Expense reimbursements that are genuine reimbursements of a receipted cost are not earnings at all. Do not put them through payroll as an allowance just because the owner “always does it that way”. Pay them through accounts payable on a tax invoice or a receipt, with GST treated correctly at 10 per cent when the tax invoice supports a credit.

The 12 per cent, the cap, and the people you forget

From 1 July 2025 the Super Guarantee is 12 per cent of OTE. Apply it to the OTE you have actually calculated, not to taxable wages and not to net pay.

Then apply the maximum contribution base. The ATO sets a cap each year (historically expressed per quarter; payday super changes the rhythm, not the idea that a cap exists). We will not print a dollar figure here, because a stale cap is how a high earner is either over-contributed from the company’s cash or under-contributed against the law. Look up the current ATO maximum contribution base for the year you are in, and put that number in the payroll settings where the software can enforce it.

People the file forgets:

  • casuals, whose OTE is ordinary casual pay including the loading if the loading is part of ordinary pay
  • contractors who are employees for super purposes even though they invoice on an ABN — see contractors versus employees
  • related parties paid irregularly
  • staff on unpaid leave who receive an allowance that is still OTE
  • staff whose salary sacrifice reduces take-home pay but does not reduce the SG shortfall calculation the way the owner hoped

Salary sacrifice to super is not a substitute for SG unless the arrangement is documented and the SG is still met on OTE. A “they asked us to put more in super and less in the hand” conversation needs a written agreement and a pay-item map that STP can report. Do not journal a sacrifice after the pay run and call it done.

Payday super made the OTE question weekly

Until 30 June 2026 many files treated super as a quarterly wash-up. You could get OTE slightly wrong in week three and fix it in the quarterly batch. From 1 July 2026, payday super requires the contribution to travel with the pay. A wrong OTE tick is now a wrong payment, not a wrong accrual.

That is why the pay-item review belongs in the same week you change an award rate or a roster pattern, not in June. If you add a new allowance on Tuesday, decide OTE on Tuesday. If you convert a casual on Thursday, decide OTE on Thursday.

The journal should still be old-fashioned:

  • debit Superannuation guarantee expense
  • credit Super payable

Then, on the same payday (or on the clearing-house batch that belongs to that payday):

  • debit Super payable
  • credit Bank

The expense should equal 12 per cent of OTE for that pay, subject to the cap. If it does not, stop. Do not “make it right in the clearing house” and leave the ledger wrong. The month-end close will catch a wandering Super payable — if you still have one after payday super, something did not leave on time.

A working OTE review that fits in an hour

Once a quarter, or when the award updates:

  1. Export pay items with their superable flags and STP income types.
  2. For each item, write “OTE / not OTE / ask” against the award clause or ATO page you used.
  3. Check the 12 per cent rate is the rate in force for the pay dates, not the rate from the year you set the file up.
  4. Check the maximum contribution base in the software against the current ATO page.
  5. Sample three employees: a casual, a permanent with overtime, and anyone on commission or a director fee.
  6. Reconcile Super expense to 12 per cent of sampled OTE.

Keep that worksheet with the payroll file. It is the document a tax agent can use when they ask whether SG is a calculation or a habit. Books a tax agent can use is the wider test; this is the super chapter.

The Rosebery desk never treated super as a kindness. It is a statutory amount on a defined base. Twelve per cent of the wrong base is not generous and it is not compliant. It is just wrong, and payday super has taken away the quarter you used to hide in.