Superannuation in salary packages and employer obligations explained

Every Australian employer must pay superannuation guarantee (super) into an eligible employee's fund at a minimum of 12% of the employee's earnings, and from 1 July 2026 within a matter of days of each payday. The recurring question for business owners is whether that super is part of the salary figure in the offer letter and employment contract, or payable on top of it. The answer decides how much cash the employee takes home and how much must reach the super fund, and getting it wrong exposes the business to the superannuation guarantee charge, which is not tax deductible and carries interest and penalties.

This guide sets out the obligations an employer takes on when it hires staff: who the superannuation guarantee applies to, the core duties it creates, the consequences of falling short, and the practical steps that keep a small business compliant. It reflects the rules in force from 1 July 2026, including the move to payday super.

Who must pay superannuation guarantee

Any business that pays a worker who qualifies for super must make contributions. The eligibility rules come from the Superannuation Guarantee (Administration) Act 1992 (Cth) (the SG Act) and are administered by the Australian Taxation Office, and they are broader than many employers assume.

An employer must pay super for:

Employees aged 18 or over: super is payable regardless of hours worked or how much they earn. There is no minimum earnings threshold.
Employees under 18: super is payable if they work more than 30 hours in a week.
Casual, part-time and full-time staff: all are covered equally. A casual who works a few hours a week still accrues super on those hours.
Domestic and private workers: nannies, housekeepers and carers are covered if they work more than 30 hours in a week.
Independent contractors paid mainly for their labour: super is calculated on the labour component of their invoice, even if they quote an ABN. The label "contractor" does not automatically exclude super.
Temporary residents: including working holiday makers and backpackers.

There is no obligation to pay super on earnings above the maximum contribution base, which is $270,830 for the 2026-27 income year. High-income earners working for multiple employers can apply to opt out of super for a financial year, and an employer that holds an exemption certificate for the employee does not pay for that period.

The core duty: pay 12% on the right earnings base

The superannuation guarantee rate is 12% from 1 July 2025, which the ATO describes as the final scheduled increase. For the 2024-25 income year the rate was 11.5%.

The rate is applied to the right earnings base, and this is where payroll mistakes happen. Up to 30 June 2026 the base is ordinary time earnings (OTE), defined in s 6 of the SG Act. From 1 July 2026 the base becomes qualifying earnings under s 10A of the SG Act.

OTE covers:

earnings for an employee's ordinary hours of work,
over-award payments, shift loadings and commissions.

OTE does not include overtime, reimbursements, or lump-sum payments for unused sick leave, annual leave or long service leave on termination.

Qualifying earnings start from OTE and add further amounts, including all commissions, payments to company directors for board work, payments for contractor labour, and amounts an employee salary-sacrifices into super.

The practical message for payroll: commissions and some allowances attract super, overtime generally does not, and the calculation must be run on the correct base for the period the earnings relate to. When the rate or the earnings base changes, payroll settings that were right last year can quietly underpay.

The contract duty: state whether the salary is "plus super" or "inclusive"

Super is only included in the salary figure if the contract says so. The default position is that a stated salary is the base wage, and super is paid on top of it. Award and enterprise agreement minimum rates are also set without super, so super is payable in addition to the minimum wage.

Two ways to word an offer:

Plus super: "You will be paid an annual salary of $80,000 plus superannuation contributions payable in accordance with the Superannuation Guarantee (Administration) Act 1992 (Cth)."
Inclusive package: "You will be paid total fixed remuneration of $80,000 inclusive of mandatory superannuation contributions payable in accordance with the Superannuation Guarantee (Administration) Act 1992 (Cth)."

The arithmetic at the current 12% rate:

Plus super: a base salary of $80,000 means super of $9,600 and total remuneration of $89,600.
Inclusive: a package of $80,000 is split by dividing by 1.12, giving a base wage of about $71,429 and super of about $8,571.

An inclusive package still has to meet the superannuation guarantee minimum. If the package leaves less than 12% for super, the employer has underpaid and faces the charge on the shortfall. When the rate changes, every inclusive package should be rechecked because the carve-out moves. A clause that refers to the SG Act rather than locking in a specific percentage stays accurate when rates move.

Salary sacrifice is a separate arrangement: an employee can agree to forgo part of their salary so the employer pays it into super instead, and the sacrificed amounts count towards the superannuation guarantee obligation. A salary sacrifice arrangement cannot reduce an employee's cash pay below award or National Employment Standards minimums, and it should be documented in writing.

The timing duty: quarterly until 30 June 2026, payday super from 1 July 2026

Until 30 June 2026, super is paid quarterly, with contributions due by the 28th day after the end of each quarter: 28 October, 28 January, 28 April and 28 July.

From 1 July 2026 the payday super rules apply. A contribution is on time if it is received by the employee's fund, with enough information to allocate it to the employee's account, within 7 business days after the day the employee is paid. The first contribution for a new employee, or to a new fund for an existing employee, has a longer window of 20 business days.

In practice the ATO recommends paying super on the same day as wages, because payments routed through a clearing house or payroll software need processing time before they reach the fund. An employer that batches super monthly will be late for most paydays and will accrue the charge.

The ATO has said it will take a supportive approach in the first year of payday super, focusing compliance action on employers who are not moving to more frequent payments or are not paying at all, rather than on employers fixing errors quickly. Supportive is not exempt: the charge still applies where contributions miss the deadline.

The choice of fund duty

Employers must offer eligible employees a choice of super fund, using the standard choice form. If an employee does not choose a fund, the employer must request the employee's stapled fund details from the ATO before paying into its own default fund. A stapled fund is the fund already linked to the employee, usually from a previous job. If the employee has no chosen fund and no stapled fund, the employer pays into its default fund.

Getting this wrong has a specific cost: failing to follow the choice of fund rules adds a choice loading amount to the superannuation guarantee charge. New employees should be asked about fund choice at onboarding, and the stapled fund request should be built into the first pay run.

Record-keeping and payslips

The Fair Work Act 2009 (Cth) requires an employer to give each employee a pay slip within one working day of paying them. Under the Fair Work Regulations 2009 the pay slip must show the required details, including the amount of any superannuation contributions made for the period, whether paid into the fund or salary-sacrificed. Payroll records, including the super contributions made for each employee, must be kept for seven years.

These obligations sit alongside the ATO's payment and reporting requirements. A pay run that satisfies the ATO but is silent on the pay slip is still a breach of the Fair Work system, and both regulators can act on it.

What happens if you miss a payment: the superannuation guarantee charge

If super is not paid in full and on time, the employer becomes liable to the superannuation guarantee charge (the SGC). From 1 July 2026 the ATO calculates the charge itself and issues a notice of assessment; employers no longer lodge an SGC statement.

The charge for a payday has four components:

the unpaid super amounts for each employee,
notional earnings on those amounts, calculated at the general interest charge rate and compounded daily,
an administrative uplift amount, initially 60% of the unpaid super and notional earnings, reduced by 20 percentage points if the employer has no ATO-initiated assessment in the previous two years, and potentially reduced to nil if the employer makes a voluntary disclosure,
a choice loading if the choice of fund rules were breached.

The SGC is not tax deductible, by operation of s 26-95 of the Income Tax Assessment Act 1997 (Cth). In other words, the employer pays more than the super it owed, loses the tax deduction it would otherwise have had, and the employees still receive their super.

The most important practical point: if a payment is missed, pay the outstanding amount to the fund as soon as the error is noticed and before the ATO assesses. Late contributions made before assessment reduce the shortfall and the interest that accrues, and a voluntary disclosure can remove the administrative uplift entirely.

Compliance checklist

Work through this list before and during each engagement to stay compliant:

Confirm eligibility: work through who is an employee for super purposes, including labour-based contractors, before each new engagement.
Pay 12% on the right base: check payroll categories against OTE for earnings to 30 June 2026 and qualifying earnings from 1 July 2026.
Word offers clearly: state "plus super" or "inclusive of super" in job ads, offer letters and contracts, and reference the SG Act rather than a fixed percentage.
Pay on time: from 1 July 2026, schedule super for each payday and allow clearing house processing time to meet the 7 business day window.
Offer fund choice: give new employees the standard choice form, request stapled fund details where there is no choice, and document the default fund.
Keep records and payslips: show super contributions on every pay slip and retain payroll records for seven years.
Recheck on changes: review inclusive packages and payroll settings whenever the rate or the earnings base changes.

When professional help is worth it

A well-run payroll makes most of these duties routine, but advice is usually worth it in four situations: drafting or updating employment contracts and offer templates so the salary wording is enforceable and clear; setting up payroll categories for commissions, allowances and contractor payments, where the OTE and qualifying earnings lines are easy to get wrong; handling a missed payment, where the timing of a voluntary disclosure or a payment to the fund materially changes the charge; and any dispute about whether a worker is an employee or a contractor, because that classification decides the whole super obligation.

A lawyer can also check award coverage and enterprise agreements, confirm what must appear on payslips under the Fair Work Regulations, and coordinate with the accountant on the tax treatment of salary sacrifice and super payments.

The change most likely to catch your business out

The rate, which has been 12% since 1 July 2025, is settled. The change most likely to produce a charge in the next year is the switch from quarterly payments to payday super on 1 July 2026. An employer that keeps its quarterly rhythm, paying super in October, January, April and July, will be late for every payday from July 2026 and will accrue notional earnings and administrative uplift on each missed deadline. The fix is immediate: put super into the same schedule as the wage run, review inclusive packages against the 12% carve-out, and confirm which earnings base your payroll applies. If your offers and contracts do not say "plus super" or "inclusive of super" in plain terms, correct the wording before the next hire.