OTE (Ordinary Time Earnings): What Counts for Super

Put simply, Ordinary Time Earnings (OTE) is the payment an employee receives for their normal or standard working hours. It’s the core salary or wage you’ve agreed upon, before you start adding extras like overtime or one-off reimbursements for expenses. Nailing this figure is non-negotiable, as it’s the bedrock for calculating your employees' superannuation guarantee contributions.

Getting OTE wrong means paying the wrong super, and the ATO can charge you for the shortfall. Our small business accountants can check what your payroll software counts as OTE and keep your super payments right.

What You'll Learn

• Your Simple Guide to Ordinary Time Earnings
• What to Include and Exclude From OTE
• Calculating Superannuation From OTE Step By Step
• How To Handle Bonuses And Allowances Correctly
• Common OTE Mistakes And How To Fix Them

Your Simple Guide to Ordinary Time Earnings

Let's think about an employee's total pay packet like a layered cake. The solid, predictable base layer is their Ordinary Time Earnings. This is their regular salary, plus any other payments that are directly tied to their standard hours, like performance bonuses or certain allowances.

The layers of icing and decorations on top are all the payments that don't count as OTE. This includes things like:

• Overtime pay for working beyond their standard hours.
• Lump-sum payouts of unused leave when their employment ends.
• Reimbursements for specific work-related costs, like a one-off payment for a business trip.

When it comes to your super obligations, the Australian Taxation Office (ATO) is only interested in that base layer—the OTE. Getting this calculation right from the start is fundamental to running a compliant payroll.

To help you get a quick grasp of what’s in and what’s out, we’ve put together a simple list. It’s a handy cheat sheet for making sure you’re on the right track.

Ordinary Time Earnings At A Glance

• Standard salary/wages (included): an employee's annual salary of $80,000 paid weekly.
• Commissions and bonuses (included): a sales commission paid for meeting regular targets.
• Shift loadings (included): extra pay for working a regular evening or weekend shift.
• Annual leave loading (generally included): unless it's clearly linked to a lost opportunity to work overtime.
• Overtime payments (not included): pay for hours worked beyond the employee's ordinary hours under their award, agreement or contract.
• Expense reimbursements (not included): refunding an employee for a client lunch they paid for.
• Unused leave paid on termination (not included): a lump sum for unused annual leave when employment ends. A payment in lieu of notice, however, is OTE.

This list gives you a great starting point, but always remember that the specifics can get tricky. The key is to ask: "Is this payment for the employee's ordinary hours of work?" If the answer is yes, it’s likely part of their OTE.

Why Does OTE Matter So Much?

The biggest reason OTE is critical for every Australian business is its direct link to the Superannuation Guarantee (SG). The law requires you to contribute a set percentage of an employee's earnings into their nominated super fund. Until 30 June 2026 that was a percentage of OTE; from 1 July 2026 it's a percentage of their qualifying earnings, which are built on OTE. If you get the OTE calculation wrong, you’ll inevitably pay the wrong amount of super, which can lead to hefty ATO penalties.

Key Takeaway: OTE isn't just another piece of payroll jargon; it's the legal foundation for calculating superannuation. A simple mistake in identifying what is and isn't OTE can snowball into non-compliance, financial penalties, and a mountain of administrative headaches.

Mastering OTE ensures your business stays on the right side of the law and that your team receives their full, correct entitlements. It's also a crucial part of accurate financial reporting, especially with systems like Single Touch Payroll (STP), which sends your payment data directly to the ATO. For more on this, you might find our guide on Single Touch Payroll reporting helpful. It will give you the foundational knowledge you need to manage your payroll with confidence.

What to Include and Exclude From OTE

Figuring out Ordinary Time Earnings (OTE) boils down to one critical task: knowing exactly which payments go into the calculation and which ones stay out. The line can feel blurry, but getting it wrong means incorrect superannuation payments—a costly mistake for any business.

Think of it like this: the Australian Taxation Office (ATO) separates payments into two groups. The first group covers all earnings tied to an employee's normal, standard working hours. This is the bedrock of their pay.

The second group is for payments that fall outside those ordinary hours or are for special, one-off purposes. These are almost always excluded from your OTE calculations.

Payments to Include in OTE

At its core, the rule is straightforward: if you’re paying an employee for their regular, rostered work, it’s probably OTE. This is the predictable and consistent portion of their earnings.

Nailing this down is one of the most important first steps when setting up payroll for small businesses, as it ensures your super guarantee obligations are met from day one.

Here’s a breakdown of what typically goes into the OTE calculation:

• Base Salary and Wages: This is the most straightforward component—it’s the regular pay an employee receives for their standard hours.
• Commissions: Payments based on sales or performance targets met during an employee’s normal working time.
• Shift Loadings: Extra pay for working shifts that fall within an employee's standard roster, like evening or weekend work.
• Certain Allowances: Allowances that are a regular and expected part of the job, such as a tool or qualification allowance, are generally included.
• Performance Bonuses: Bonuses that are directly linked to an employee’s work performance during their ordinary hours.
• Paid Leave: This covers any annual leave, sick leave and long service leave taken while the person is still employed with you.
• Annual Leave Loading: Generally included, unless the loading is clearly paid to make up for a lost opportunity to work overtime.

The main test is always whether the payment is for an employee’s ordinary hours of work.

Payments to Exclude From OTE

Knowing what not to include is just as important. Accidentally classifying these payments as OTE can lead you to overpay super, creating unnecessary costs and compliance headaches.

Ordinary Time Earnings form the backbone of superannuation calculations for Australian employers. According to the Australian Taxation Office (ATO), OTE includes payments for ordinary hours of work but explicitly excludes overtime and reimbursement-style payments. This definition stems from the Superannuation Guarantee (Administration) Act 1992, as detailed in the ATO's official guidance, which you can explore to better understand the list of payments that are ordinary time earnings.

With that in mind, here are the key payments to leave out of your OTE calculations:

• Overtime Payments: Any pay for hours worked beyond an employee’s ordinary hours under their award, agreement or contract is excluded from OTE.
• Expense Reimbursements: Payments that simply refund an employee for a specific, work-related expense (like travel costs or client lunches) are not earnings, so they are not OTE.
• Unused Leave on Termination: Lump-sum payouts for unused annual leave, sick leave or long service leave on termination are excluded. (A payment in lieu of notice is different: it is OTE.)
• Certain Bonuses: Bonuses that are paid wholly for overtime hours are not OTE.

By clearly separating these payment types, you can be confident your super calculations are accurate, compliant, and fair to both your business and your team.

Calculating Superannuation From OTE Step By Step

So, you’ve sorted out what counts as Ordinary Time Earnings for your employees. The good news is that the hardest part is over. Calculating the actual superannuation guarantee (SG) contribution is surprisingly simple once you have that OTE figure.

The whole process boils down to one straightforward formula.

Employee's OTE for the period × Current Super Guarantee Rate = Superannuation Contribution

Until 30 June 2026, employers ran this calculation at least quarterly. From 1 July 2026, under Payday Super, super guarantee is worked out each payday on qualifying earnings (which include OTE) and must reach the employee's fund within 7 business days. See Payday Super: is your payroll ready?. Here are two examples.

Example 1: Full-Time Salaried Employee

Let’s start with a simple case. Imagine you have a full-time marketing manager, Sarah, who is on a base salary of $90,000 per year. She’s paid monthly, so her OTE for the month is just her annual salary divided by 12.

1. Calculate monthly OTE: $90,000 ÷ 12 = $7,500
2. Apply the SG rate: the super guarantee rate is 12% (since 1 July 2025).
3. Calculate monthly super: $7,500 × 0.12 = $900

For that month, you would need to contribute $900 to Sarah's chosen super fund. It's a clean, predictable calculation for employees with consistent pay.

Example 2: Part-Time Employee With a Bonus

Now for a more common scenario. Let's look at David, a part-time retail employee. His hours can change from week to week, but in one monthly pay he earned $3,000 in regular wages. On top of that, he also received a $500 performance bonus for hitting sales targets during his ordinary hours.

Because the bonus is directly related to his ordinary work, it counts towards his OTE. His total OTE for that pay includes both his wages and that bonus.

• Total OTE: $3,000 (wages) + $500 (bonus) = $3,500
• Apply the SG rate: $3,500 × 12% = $420

You would need to pay $420 into David's super fund for that pay. This shows why it's important to check OTE every time you make variable payments like commissions or bonuses. See our guide to the superannuation guarantee.

The maximum contribution base

There's one more rule to know: the maximum contribution base. Once an employee's qualifying earnings for the year reach this limit, you don't have to pay super guarantee on the rest of their pay that year (unless an award or agreement requires it).

For 2026–27 the limit is $270,830 for the year. Before Payday Super started on 1 July 2026, it was a quarterly limit ($62,500 a quarter for 2025–26).

Take a high-earning executive on $300,000 a year. Super guarantee stops once their qualifying earnings for 2026–27 reach the limit:

• Super on earnings up to the limit: $270,830 × 12% = $32,499.60
• No minimum super is required on the remaining $29,170 of their pay that year

The limit is worked out from the concessional contributions cap ($32,500 for 2026–27) divided by the 12% super guarantee rate, rounded down to the nearest $10, so super guarantee on earnings up to the limit lines up with the cap. It changes when the cap is indexed, so check the ATO website for the current figure.

Salary sacrifice and super guarantee

If an employee salary sacrifices part of their pay into super, those contributions don't reduce the earnings you calculate super guarantee on, and they don't count towards your super guarantee obligation. Since 1 January 2020, super guarantee has been worked out on OTE plus any amounts sacrificed into super that would otherwise have been OTE; from 1 July 2026 those sacrificed amounts form part of qualifying earnings. For example, an employee with $9,000 a month in OTE who sacrifices $1,000 of it into super still gets super guarantee on the full $9,000, on top of the $1,000 they sacrificed. Amounts sacrificed for other benefits, such as a novated car lease, aren't counted.

How To Handle Bonuses And Allowances Correctly

When it comes to calculating Ordinary Time Earnings (OTE), bonuses and allowances are where most businesses get tripped up. The treatment of these payments for superannuation isn't always straightforward—it all comes down to why the employee is receiving the money.

Get this wrong, and you could be facing a superannuation shortfall and ATO penalties.

The simplest way to think about it is to ask: is this payment part of their expected salary package, or is it just paying them back for a specific work-related cost? A bonus for hitting regular sales targets is clearly part of their earnings. But a payment to cover the exact cost of a business flight is just a refund—not earnings.

Understanding this difference is the secret to classifying these payments correctly and keeping your super calculations accurate. Let’s look at the most common ones we see.

Decoding Bonuses: Performance vs Overtime

Bonuses are a classic source of confusion. The golden rule is to determine if the bonus is tied to work done during an employee's ordinary hours.

• Performance Bonuses (Included in OTE): A bonus paid to a salesperson for meeting their monthly targets is directly connected to their regular work. This is OTE, and you must pay super on it.
• Overtime-Related Bonuses (Excluded from OTE): If you give an employee a bonus specifically for working hours outside their normal contract—like a bonus for working a public holiday that isn't part of their usual roster—this payment is not part of their OTE.

The Australian Taxation Office (ATO) is crystal clear on this point. If a bonus is an incentive for performance within standard work hours, it’s OTE. If it’s a reward for working extra hours, it generally isn't.

For more detail on the tax side of things, you might also want to read our guide on how to handle the tax on bonus payments.

Allowances: Salary Package vs Reimbursement

Allowances are another grey area that trips people up. Again, it all depends on whether the payment is an expected part of the employee's regular pay or a direct repayment for an expense they incurred for work.

1. Allowances Included in OTE

These are fixed payments an employee receives as part of their salary package. They get the money whether they spend it on a specific item or not, so it’s treated as part of their earnings.

• Tool Allowance: A tradesperson gets a $50 per week tool allowance. This is OTE because it's a guaranteed part of their pay, not a refund for a specific tool they bought.
• Qualification Allowance: An accountant is paid an extra $2,000 per year for holding a professional certification. This is OTE.

2. Allowances Excluded from OTE

These payments are made to cover a precise, verifiable, work-related expense. The employee isn't meant to make a profit; you're just making them whole.

• Travel Reimbursement: An employee hands you receipts for a $150 train ticket and a $45 client lunch. The $195 you pay them is a direct reimbursement, so it’s not OTE.
• Car Allowance (per kilometre): Paying an employee a set rate per kilometre for using their personal car on business trips is a reimbursement. It is excluded from OTE.

OTE vs Average Weekly Ordinary Time Earnings (AWOTE)

You spend a lot of time calculating the Ordinary Time Earnings (OTE) for each of your employees. But there’s another figure you need to have on your radar: Average Weekly Ordinary Time Earnings (AWOTE).

You don't calculate this one yourself. AWOTE is a major economic benchmark, released twice a year by the Australian Bureau of Statistics (ABS). It's the national average of what full-time adults are earning for their standard hours across the country.

Think of it like this: your employee's OTE is a single tree. AWOTE is the health of the entire forest. It gives you a bird's-eye view of wage trends in Australia, which is a massive advantage for business planning and making sure your pay rates are competitive.

This statistic is far more than just a number for economists to debate. It's used to index legislative thresholds, including the concessional contributions cap (and through it, the maximum super contribution base), and it signals important shifts in the labour market. Paying attention to AWOTE helps you make smarter, more strategic financial decisions for your business.

How Businesses Can Use AWOTE Data

Keeping an eye on AWOTE trends is a smart move for staying competitive and planning for the future. Here’s how you can use the data:

• Benchmark Your Salaries: How do your pay rates stack up? Comparing your salaries to the national average helps you know if you’re offering enough to attract and keep top talent.
• Forecast Wage Growth: When AWOTE is on the rise, it’s a clear signal that wage pressures are building. This gives you a heads-up to budget for salary increases in your financial forecasts before they become a problem.
• Inform Financial Decisions: AWOTE is used to index various government payments and thresholds. Knowing its movements helps you anticipate changes that could impact your super obligations and other costs.

For example, the ABS reported that seasonally adjusted full-time adult AWOTE rose 3.7% in the year to May 2026, to $2,083.70 a week. Watching these trends shows you exactly how the wage landscape is shifting across Australia.

While you won't use AWOTE for your day-to-day payroll runs, it’s a vital strategic tool. You can dive deeper into the ABS's own guide to understand employee earnings and hours statistics to get the full picture. For any forward-thinking business owner, this isn't just data—it's intelligence.

Common OTE Mistakes And How To Fix Them

Getting Ordinary Time Earnings wrong is surprisingly easy, and even small slip-ups can snowball into a major headache with the Australian Taxation Office (ATO). We’ve seen it happen time and again—simple miscalculations leading to hefty penalties and stressful audits.

Think of this as your payroll pre-flight check. We're going to walk through the most common traps businesses fall into and, more importantly, give you a clear, practical plan to fix them before they become a problem.

Most errors come down to one thing: misclassifying payments like allowances, bonuses, and commissions. Get these wrong, and you’re almost guaranteed to be underpaying your superannuation guarantee—a serious compliance breach the ATO does not take lightly.

Misclassifying Allowances

One of the most frequent mistakes we see is businesses treating all allowances as simple reimbursements, and therefore excluding them from OTE. This is a critical misunderstanding that can quickly create a super shortfall.

• The Mistake: A business pays a weekly $50 tool allowance but doesn't include it in OTE calculations, assuming all allowances are exempt.
• The Fix: You must look at the purpose of the allowance. If it’s a fixed, predictable payment that’s an expected part of the employee's salary—like a tool or qualification allowance—it must be included in OTE. Only direct reimbursements for a specific, receipted work expense can be excluded.

Forgetting About Commissions And Bonuses

Another classic pitfall is leaving commissions and performance bonuses out of the super calculation. These payments are almost always tied to an employee's work during their ordinary hours, making them part of their OTE.

Key Insight: The ATO’s position is straightforward. If a bonus or commission is paid to reward an employee for their performance during their standard working hours, it's considered OTE. Super is payable on it.

• The Mistake: A salesperson earns a $2,000 bonus for hitting their quarterly targets, but the employer only calculates super on their base salary.
• The Fix: Always include performance-related bonuses and commissions in your OTE calculations for the pay period in which they are paid. The best defence here is to review your payroll system settings. Make sure these payment types are automatically flagged to have super calculated on them, removing the risk of manual error.