Are you at risk of claims to pay more super?

Ai Group has successfully represented a member company in a dispute with the ATO over the meaning of Ordinary Time Earnings (OTE) for superannuation purposes – an issue with the potential to have significant financial consequences for many businesses.

The ATO issued binding advice that the company was required to make superannuation contributions on the basis of 56 hours per week, including 18 hours of regular overtime that was built into the roster and which was compensated for by a higher (loaded hourly) rate.

On behalf of the company, Ai Group applied to have the original advice reviewed, but the ATO confirmed its original advice.

We then took the matter up at a higher level within the ATO. Following the second review of the original advice, the ATO has now confirmed that they agree with our view that superannuation is only payable on 38 ordinary hours, not 56 hours. An important factor was that the industrial instrument drew a genuine distinction between ordinary hours and other hours. The following extract from the ATO advice is relevant:

“……the relevant award or agreement must draw a genuine distinction between ordinary hours and other hours. Furthermore, it is expected that these other hours, typically described as overtime, are remunerated at a higher rate of pay than the ordinary hours or are otherwise identifiable as a separate component of the total pay in respect of non-ordinary hours.”

This issue has some similarities with the debate which occurred between Ai Group and the ATO in 2008 and 2009 when Superannuation Guarantee Ruling SGR 2009/2 – Meaning of the terms ‘ordinary time earnings’ and ‘salary or wages’ was being developed. Ai Group successfully fought to ensure that employers were not forced to pay superannuation on overtime earnings. At the time, industry was potentially faced with billions of dollars per year of additional costs.

This is an important issue for employers to bear in mind when drafting or reviewing enterprise agreements or employment contracts. If the agreement includes a roster which incorporates regular overtime, or if the agreement requires a specified number of additional hours to be regularly worked, the agreement should separately identify the ordinary hours and the overtime hours.

If the agreement or contract is poorly drafted, there is the risk that superannuation may be payable on the additional hours. There will also be potentially costly implications for other entitlements such as annual leave accruals, personal/carer’s leave accruals and public holidays, among other things.

Is this an issue that has confronted your business? Tell us more below.

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Stephen Smith
Ai Group's Head of National Workplace Relations Policy, Stephen Smith is responsible for workplace relations policy development and advocacy. He regularly represents industry’s views to governments and opposition parties, and in numerous inquiries and major cases. He is Special Counsel for, and Chairman of the Board of, Ai Group Workplace Lawyers, a national law firm operated by Ai Group.


  1. Avataralistair mcbride

    So if our agreement states we work 42 hours per week made up by 38 ordinary hours and the remaining 4 hours as overtime paid at the single time rate, we would still be liable for super payments on the 4 hour because they are paid at the same rate as the ordinary hour?

    1. Stephen SmithStephen Smith (Post author)

      Alistair, if an enterprise agreement clearly identifies a particular number of additional hours beyond the 38 ordinary hours as overtime, superannuation would not be payable on the additional hours, despite the fact that the agreement allows these overtime hours to be paid at the same flat rate as the 38 ordinary hours. This is the general position but we would need to review the terms of your agreement to provide a definitive answer.

      1. AvatarAlistair Mcbride

        Stephen thanks for the reply and clarifying that for me.


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