- Who owes the duty: the company, with directors deemed to be employees
- How much to pay: 12% of qualifying earnings
- When to pay: within seven business days of payday
- How to report and record director pay
- What happens if the company misses super: the SGC and penalties
- A compliance checklist for director pay
- When to bring in an accountant or a lawyer
- Why director's fees are the payment that catches companies out
Operating through a company changes the superannuation question completely, because the company is a separate legal entity and the obligation sits with the company, not with you personally. If the company pays you a salary, wages or director's fees, it will generally owe superannuation guarantee (SG) on top, at 12% of what it pays you. That obligation comes from the Superannuation Guarantee (Administration) Act 1992 (Cth) (the SGAA), and it does not disappear because you own the company or sit on its board.
The title "director" is not the test. The test is how the company pays you, and whether the payment counts as qualifying earnings for SG purposes. This guide sets out who the obligation applies to, which payments trigger it, how much to pay and by when, what happens if the company misses a payment, and the practical steps to stay on top of it. Getting it wrong is not a paper exercise: the company can face the superannuation guarantee charge (SGC), penalties, and directors can in some cases be made personally liable. The timing rules also changed on 1 July 2026 with the introduction of Payday Super, so advice that was accurate a year ago is now out of date.
Who owes the duty: the company, with directors deemed to be employees
Employers must pay SG for their employees, and the SGAA deliberately does not rely on the ordinary meaning of "employee". Under s 12(2) of the SGAA, a person who is entitled to payment for performing duties as a member of the executive body of a body corporate, described as the board of directors or otherwise, is treated as an employee of the body corporate in relation to those duties. A director who is entitled to director's fees is therefore an employee for SG purposes, even if they do no operational work. Under s 12(3), a person who works under a contract wholly or principally for their labour is also an employee, which is why a working director paid through payroll is squarely caught.
The practical consequence is that the company owes the SG obligation. It is not something the director arranges for themselves. When the company pays a director an amount of qualifying earnings, s 17A of the SGAA gives the company an individual superannuation guarantee amount for that payment, equal to the charge percentage of the amount paid. The Act fixes the charge percentage at 12.
The quick scoping picture for a small company looks like this:
- Salary or wages through payroll: SG applies. A working director paid a wage is treated like any other employee, and the company pays 12% into a complying super fund.
- Director's fees: SG applies in most cases. Payments for board duties are expressly caught by s 12(2) and count as qualifying earnings.
- Commissions and bonuses: SG applies where the payment forms part of qualifying earnings. Commissions are expressly included.
- Dividends: SG generally does not apply, because dividends are a distribution of profits to shareholders, not qualifying earnings.
- Genuine loans: SG generally does not apply, but loans carry their own tax and documentation risks.
The trigger: whether the payment counts as qualifying earnings
The SGAA bases the obligation on qualifying earnings. Under s 10A, a person's qualifying earnings include:
- their ordinary time earnings (OTE);
- all commissions payable to them;
- all payments for performing duties as a member of the executive body of a body corporate, which captures director's fees; and
- payments under a labour contract, together with amounts salary sacrificed into super.
Before 1 July 2026 the base was ordinary time earnings only. From 1 July 2026, under Payday Super, the ATO explains that the SG amount is calculated on qualifying earnings, a term that brings together OTE and the other amounts that were previously included in salary or wages for SG purposes. The change matters because it makes the base wider and consistent across payment types, and because it means the answer to "does the company have to pay super on this payment" turns on the s 10A list.
Salary and wages
If the company pays you through payroll as a wage or salary, the payment is qualifying earnings and SG applies, exactly as it does for any other employee. The company needs to identify the correct base and pay 12% on it. Whether your quoted salary is "super inclusive" or "super exclusive" changes the arithmetic but not the obligation: an inclusive figure already contains the SG component within it, while an exclusive figure is paid on top of the SG. Getting this setting wrong in payroll software is a common source of underpayment.
Director's fees
Director's fees are payments for carrying out board duties: attending meetings, governance, strategic oversight. They are the payment most often assumed to be super-free, but s 12(2) of the SGAA treats a director entitled to fees as an employee in relation to those duties, and s 10A counts the fees as qualifying earnings. So the company generally owes SG on director's fees even where the director is not otherwise an employee. The ATO's Payday Super guidance is explicit that the regime applies to directors and executives of a company, not just other staff.
Bonuses and commissions
Commissions are expressly part of qualifying earnings under s 10A. Bonuses are included where they form part of ordinary time earnings or otherwise fall within qualifying earnings. A bonus paid out of cycle, between regular paydays, is still qualifying earnings, and the ATO's guidance is that its SG contribution is due with the contribution for the next regular payday. Because bonus arrangements vary so much between companies, this is a sensible place to check the specific treatment with your accountant rather than rely on a general rule.
Dividends
Dividends are a return to shareholders out of company profits. They are not payments for work, they do not appear anywhere in the s 10A list, and SG is not payable on them. The catch is practical rather than legal: a director who takes only dividends and no salary or fees will build up no compulsory super at all unless they make personal contributions. That can be a deliberate and workable strategy, but it should be a decision, not an accident of bookkeeping. Dividends also have their own governance requirements, including that they can only be paid out of profits.
Director loans
Money drawn through a director loan account is not a wage and does not attract SG, so long as it is a genuine loan. The risks sit elsewhere: a loan that is never documented, has no repayment terms and is topped up every pay period can be recharacterised for income tax purposes, and it muddies the distinction between what the company owes you and what you owe the company. Directors who routinely draw against a loan account should have a written loan agreement and a plan for repayment.
How much to pay: 12% of qualifying earnings
The rate is 12%, and Payday Super did not change it. The ATO confirms the percentage used to calculate SG contributions is still 12%, and s 17A of the SGAA fixes the charge percentage at 12. As a worked example, a director paid $100,000 in salary and $20,000 in director's fees in a year has qualifying earnings of $120,000. At 12%, the company must contribute $14,400 for the year, or $1,200 for every $10,000 paid.
The contribution must be paid into a complying super fund in the director's name. Directors, like other employees, can generally choose their fund, and where no choice is made the company may use the employee's stapled fund or its default fund. Contributions also count against the director's annual concessional contributions cap, so a director who also makes personal contributions should watch the total across the year, because amounts over the cap attract extra tax.
When to pay: within seven business days of payday
From 1 July 2026, SG contributions must be received by the employee's super fund within seven business days after the company pays the employee, with enough information for the fund to allocate the contribution to the member's account. The ATO calls the payday the QE day, the day qualifying earnings are paid. Business days exclude weekends and any day that is a public holiday for a whole Australian state or territory.
The ATO recommends paying super on payday itself, because using a clearing house or payroll processor eats into the seven business days. Longer windows apply in limited situations: the first contribution for a new employee, or to a new super fund, has 20 business days after the relevant payday, and out-of-cycle payments have their SG due with the contribution for the next regular payday.
Before 1 July 2026 the old regime applied, with contributions due within 28 days after the end of each quarter, on 28 October, 28 January, 28 April and 28 July. Quarterly thinking is now the trap to unlearn: under Payday Super the deadline arrives at every payday, and for a director paid weekly or fortnightly the company has seven business days from each pay run. The Small Business Superannuation Clearing House also closed on 30 June 2026, so small companies that relied on it need an alternative payment channel.
How to report and record director pay
From 1 July 2026, employers report both qualifying earnings and the super liability through Single Touch Payroll (STP), where previously they reported OTE or the super liability. Beyond payroll, the documents around director pay matter because they are what show the ATO, an auditor or a liquidator what a payment actually was:
- Board resolutions: approving director's fees, so fees are a deliberate decision of the company rather than an informal drawing.
- An employment contract or director service agreement: setting out duties and remuneration where the director works in the business day to day.
- A written loan agreement: for any director loan, with repayment terms.
- Minutes and accounting records: describing payments consistently.
Mischaracterisation is the underlying risk. If a payment is recorded as a loan or dividend but operates as remuneration for work, the company has effectively avoided SG on a payment that the SGAA treats as qualifying earnings.
What happens if the company misses super: the SGC and penalties
Miss a deadline and the company faces the superannuation guarantee charge. From 1 July 2026 the SGC is assessed by the ATO rather than self-assessed by the employer, and it is calculated on qualifying earnings. The ATO explains that the charge includes interest that compounds daily at the general interest charge rate, plus an administrative uplift amount reflecting the cost of enforcement. That uplift can be reduced where the ATO has not previously taken action against the employer and the employer lodges a voluntary disclosure, so early disclosure is genuinely worthwhile.
Penalties for failing to pay the charge are set at 25% of the unpaid amount, rising to 50% where the employer has had a prior penalty within the previous 24 months; s 59C of the SGAA sets this out, and the ATO confirms the 25% and 50% figures under Payday Super. Unpaid charge also attracts the general interest charge under s 49 of the SGAA. One change in the company's favour: the ATO notes that from 1 July 2026 the SGC is tax deductible, where it previously was not.
The sharpest consequence is personal. Under the ATO's director penalty regime, directors can be made personally liable for the company's unpaid superannuation guarantee charge, along with unpaid PAYG withholding and GST. For a director who assumed super was optional for themselves, that is the outcome to fear most: the ATO can pursue personal assets for a debt the company failed to pay, and unpaid super is a corner of the penalty regime the ATO pursues actively.
A compliance checklist for director pay
Run through this checklist to keep director pay on the right side of the SG rules:
- Classify every payment: list what the company has paid you, and sort each amount into salary, fees, commissions, dividends, loans or reimbursements.
- Run qualifying earnings through payroll: salary and director's fees belong in payroll and STP, with qualifying earnings and the super liability reported.
- Pay 12% within seven business days of payday: pay on payday where possible, and confirm with your fund or clearing house how long a payment takes to arrive.
- Check the super inclusive or exclusive setting: confirm the base is right in your payroll software.
- Document the arrangement: resolutions approving fees, an employment contract where applicable, and written terms for any loan.
- Only take dividends out of profits: recorded as a distribution, not as disguised pay.
- Disclose late payments voluntarily: to reduce the administrative uplift amount if the company has missed a deadline.
- Get advice promptly if super has been missed historically: before the ATO raises the issue.
When to bring in an accountant or a lawyer
An accountant or registered tax agent is the right first stop for working out which payments are qualifying earnings, what the correct SG base is, and whether past payments were mischaracterised. They can also fix payroll and STP settings and confirm the super inclusive or exclusive treatment.
A lawyer is needed for the structure around the payments: approving director's fees by board resolution, drafting an employment contract or director service agreement, documenting a director loan with enforceable terms, updating a company constitution or shareholders agreement, and assessing exposure if obligations have been missed. If the company has already received a director penalty notice, legal advice should be immediate, because the response window is short and the personal liability is real.
Why director's fees are the payment that catches companies out
The pattern that costs the most is paying a working director through director's fees or a running loan account while treating the money as if it were a dividend. Fees attract SG under s 12(2) of the SGAA. Loans do not, but only while they are genuine loans: a loan account that is never documented, never repaid and topped up every pay period can be recharacterised, and the ATO can pursue the director personally for the super that should have been paid all along. Under Payday Super the deadline now arrives at every payday, not four times a year. The first action this week is to list what the company has paid you in the past quarter, classify each payment against the s 10A list, and confirm that super on anything that counts as qualifying earnings is reaching your fund within seven business days of payday.