Changes to Employee Superannuation Benefit Calculations June 2007

What are the new changes?

The superannuation guarantee legislation has been amended to simplify an employees’ earnings base for the purpose of calculating the superannuation guarantee.


From 1 July 2008, all employers must use “ordinary time earnings” to calculate their superannuation contributions provided for the benefit of their employees.

These amendments will standardise the earnings base to attempt to ensure that all employees will be treated the same for superannuation guarantee purposes.

If employers are using an earnings base other than ordinary time earnings (see below) to calculate superannuation contributions, they must start using ordinary time earnings for all employees from 1 July 2008.

What are “Ordinary Time Earnings”?

The earnings base for most employees is their ordinary time earnings.

Ordinary time earnings are an employee’s earnings in respect of ordinary hours of work (including over-award payments, commissions, shift allowances and paid leave).

Ordinary time earnings are however subject to the maximum contribution base.

The “maximum contribution base" is the maximum limit that an employer is expected to provide superannuation for the benefit of an employee. It is subject to annual indexation. The maximum contribution base for a quarter in the 2006-2007 year is $35,240. What this means is employers do not currently have to contribute more than 9% of $35,240 for any employee for a particular quarter.

Superannuation Guarantee

The superannuation guarantee requires employers to provide superannuation support for their employees. To avoid a superannuation guarantee charge, the minimum support required is 9% of an employee’s notional earnings base.

The earnings base is usually stated in an industrial award, superannuation fund’s trust deed or an existing agreement made with the employee.

If there is no acceptable earnings base relevant to a particular employee, or if the award does not prescribe a definition of ordinary earnings, then a default earnings base equivalent to “ordinary time earnings” of the employee will apply (subject to the maximum contribution base)

When does the new law apply?

The new law will come into effect from 1 July 2008.

What this means for your business?

From 1 July 2008, employers must calculate the basis of their superannuation contributions on behalf of their employees against ordinary time earnings.

This may, in some cases, increase the superannuation contributions from those currently being made. For example, if the super contributions percentage in an industrial award is below the minimum 9%, you will have to pay extra to meet the minimum amount of 9% and avoid superannuation guarantee penalties.

Employers have just over 12 months to adjust new employment arrangements and build, if necessary, the increased superannuation contributions into their workplace bargaining processes. You will need to consider the impact these changes make to your organisational systems and how to communicate these changes to your employees.

To find out more about these changes or discuss the implementation of these changes to your business, please contact Andrew Bland at [email protected].

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