If you employ people in Australia, superannuation guarantee (SG) is a compulsory employer cost, not a deduction from an employee's take-home pay. You must pay at least 12% of each eligible worker's earnings into a complying super fund, on top of their wages, and you must do it on time. The rules changed significantly on 1 July 2026, when the Payday Super regime replaced quarterly payment cycles, so advice written before that date is now out of date.
This article sets out the employer's side of the obligation: who is covered, what you must pay and on what base, when payments are due, how contractors fit in, and what the Australian Taxation Office (ATO) can do if you fall behind.
Who has to pay superannuation
The SG obligation sits with the employer. It applies whether you trade as a company, a trust, a partnership or a sole trader, and it covers almost everyone who works for you. The key thresholds are set out in the Superannuation Guarantee (Administration) Act 1992 (Cth) (the SGAA) and the ATO's eligibility guidance:
- Employees aged 18 or over: you pay super regardless of how many hours they work.
- Employees under 18: you pay super only if they work more than 30 hours in a week, based on the actual hours worked in that week. You cannot average hours across a fortnight or month.
- Domestic and private workers: nannies, housekeepers and carers are covered once they work more than 30 hours in a week.
- Casual, part-time and full-time staff: all covered. So are temporary residents such as backpackers, company directors, and family members who work in the business.
- Independent contractors paid mainly for their labour: treated as employees for SG purposes (see below).
There is no longer an earnings threshold. The old rule that super was only payable once an employee earned $450 in a month was removed on 1 July 2022, so a part-time worker earning a few hundred dollars a month is still entitled to SG. The main exclusions are people who are genuinely self-employed, non-resident employees working entirely outside Australia, and employees who hold a valid employer shortfall exemption certificate because they have opted out as a high-income earner with multiple employers.
How much super you must pay
The SG rate is 12% of the worker's earnings base. That rate has applied since 1 July 2025 and is the final scheduled increase, so it will not climb further unless Parliament legislates a change.
The earnings base itself changed on 1 July 2026. Up to 30 June 2026, SG was calculated on ordinary time earnings (OTE). From 1 July 2026, under Payday Super, it is calculated on qualifying earnings, a broader concept defined in s 10A of the SGAA. For most employers the dollar amount is identical, because qualifying earnings includes OTE plus all commissions (including commissions for work done entirely outside ordinary hours) and payments to contractors covered by the labour test.
The calculation is simple: multiply the worker's pre-tax qualifying earnings for the pay period by 12%. A fortnightly wage of $3,000 for ordinary hours of work means a super payment of $360 for that pay period. You may pay more than 12% if an award, enterprise agreement or contract requires it, but you cannot pay less.
One cap applies. You do not have to pay SG on earnings above the maximum contribution base (MCB), which is indexed annually and was $62,500 per quarter for 2025-26. The cap does not affect voluntary contributions or higher amounts required by an industrial instrument.
What counts as qualifying earnings
Qualifying earnings starts with OTE, which s 6(1) of the SGAA defines as earnings in respect of ordinary hours of work, plus over-award payments, shift loading and commission. Ordinary hours are the hours set out in the relevant award or agreement; if none is specified, they are the employee's regular or customary hours, and for casuals with no pattern, the hours actually worked.
The ATO's payment lists give a practical picture of what sits inside and outside the base:
- Included: ordinary hours pay, casual loading, shift penalties, piece rates for work in ordinary hours, task and site allowances, annual leave, most annual leave loading, long service leave, rostered days off paid at ordinary rates, and amounts salary sacrificed to super.
- Excluded: genuine overtime (provided ordinary hours are clearly identified in an award or agreement), overtime meal allowances, on-call and call-back allowances for hours outside ordinary hours, expense reimbursements, expense allowances expected to be fully expended, paid parental leave, community service, jury duty and defence reserve leave, fringe benefits, and workers compensation top-ups paid while the employee is not required to work.
Two Payday Super changes are easy to miss. First, all commissions are now qualifying earnings, even commissions earned entirely from work done outside ordinary hours; under the old rules those did not count. Second, a bonus paid solely for work done outside ordinary hours is still excluded, so the label on the payment matters as much as the amount.
Termination payments need line-by-line treatment. Unused annual leave, annual leave loading, long service leave, personal leave, rostered days off and time off in lieu paid out on termination are not qualifying earnings, and neither are genuine redundancy or ex-gratia payments. On the ATO's current position, however, payment in lieu of notice is qualifying earnings. In its worked example, a redundancy package of $40,000 made up of $10,000 in lieu of notice, $25,000 redundancy and $5,000 ex-gratia attracts super only on the $10,000 in lieu of notice component, or $1,200 at 12%.
When super must be paid
Timing is where the biggest change happened. Under the old regime, super was due quarterly, by the 28th day after the end of each quarter: 28 October, 28 January, 28 April and 28 July.
From 1 July 2026, Payday Super requires you to pay super for each payday, and the contribution generally needs to be received by the fund, with enough information to allocate it, within 7 business days after the employee is paid. The SGAA gives effect to this through the usual period definition in s 6(1), which runs from the payday to the seventh business day after it. Monthly and quarterly runs no longer satisfy the obligation by themselves, so payroll settings that batch super payments at quarter end will produce a shortfall.
If you miss the payment deadline, you must lodge a super guarantee charge (SGC) statement and pay the charge. Under the quarterly rules that ran until 30 June 2026, the SGC was due one calendar month after the SG due date, for example 28 November for the September quarter.
Choice of fund and stapled funds
When you take on an eligible worker, you must give them a standard choice of fund form within 28 days of their start date. If they do not choose a fund, you must request their stapled fund details from the ATO and pay contributions there; the stapled fund rules in ss 32Q to 32R of the SGAA let the ATO identify the fund already linked to the employee. Only if there is no stapled fund and no choice can you pay into your default fund. These obligations also apply to independent contractors who are employees for SG purposes.
Super for contractors
The biggest classification trap in the SG rules is the contractor. Under s 12(3) of the SGAA, a person who works under a contract that is wholly or principally for their labour is an employee for SG purposes, no matter what the contract calls them. The ATO's guidance says the test is satisfied where more than half the dollar value of the contract is for the person's labour, they are paid for their personal labour and skills rather than a specified result, and they cannot delegate the work to someone else. An ABN does not change the analysis.
If the test applies, you pay 12% of the labour component of their payments. You do not include amounts for materials and equipment, payments at overtime rates, or GST. If you contract with a company, trust or partnership rather than an individual, the obligation generally does not apply to you, but substance prevails over form: the ATO can look through arrangements, and s 30 of the SGAA neutralises schemes designed to avoid the charge. The ATO's current compliance approach for classifying workers is set out in PCG 2023/2, read with ruling TR 2023/4 on who is an employee.
What happens if you do not pay on time
The SGC is deliberately more expensive than the contributions you skipped, and it is not tax deductible. Under the ATO's breakdown of the charge, it comprises:
- the SG shortfall, calculated on salary and wages including overtime, which is a broader base than OTE;
- a choice liability for choice of fund failures, capped at $500 per employee;
- nominal interest of 10% per annum accruing from the start of the relevant quarter; and
- an administration fee of $20 per employee per quarter.
Beyond the charge itself, the ATO can impose:
- a Part 7 penalty of up to 200% of the SGC for lodging the SGC statement late or failing to provide information during an audit;
- an administrative penalty of up to 75% of the shortfall for false or misleading statements;
- general interest charge (GIC), which compounds daily on unpaid SGC and, for GIC incurred from 1 July 2025, is itself not deductible;
- director penalties: directors can be personally liable for a penalty equal to the unpaid SGC, enforced by director penalty notice or by withholding refunds; and
- fines for record-keeping failures, up to 30 penalty units for an individual, and 10 penalty units for failing to pass an employee's tax file number to their fund.
The ATO also tells affected employees and former employees about shortfalls and prioritises collection of SGC debts, so an unpaid quarter rarely stays quiet. If you discover an underpayment, the fastest fix is to pay the outstanding amount to the fund before the ATO raises an assessment, because an assessment will always be for more than the contributions themselves.
A compliance checklist
The checklist below turns the obligations in this article into steps you can verify each pay cycle:
- Confirm each worker's status: employee, contractor mainly for labour, or genuine business-to-business arrangement.
- Set the SG rate at 12% and build qualifying earnings categories into payroll, not a manual spreadsheet.
- Check the award or enterprise agreement for defined ordinary hours and for any obligation to pay super above the SG rate.
- Pay super each payday, with contributions reaching the fund within 7 business days, and reconcile after every pay run.
- Give every new eligible worker a choice of fund form within 28 days and request a stapled fund from the ATO if they do not choose.
- Review termination payments line by line so leave payouts, redundancy and payment in lieu of notice are classified correctly.
- Keep records of earnings calculations, contributions, fund details and receipts, and update settings each 1 July.
When to get legal help
Super compliance is mostly administrative, but three situations justify a lawyer. The first is classification: whether a worker is an employee, a contractor mainly for labour, or a genuine independent business can determine not just super but wages, leave and tax obligations, and misclassification is expensive to unwind. The second is a missed payment or an ATO audit, where responding to an SGC assessment, negotiating a payment plan, or challenging a director penalty notice calls for advice on your options before you commit to a position. The third is drafting: employment contracts and contractor agreements should state clearly whether remuneration is plus super or a package that includes it, and should define ordinary hours so the payroll base is not left to argument.
The transition most employers will miss
The single change most likely to catch a business out is not the 12% rate, which payroll software handles, but the move to Payday Super. If your payroll still accumulates super and pays it quarterly, or still excludes commissions earned outside ordinary hours, you are building an SGC liability in real time, and the ATO will not need to audit you to find it: affected employees can refer unpaid super directly. The first action to take this week is to confirm that your payroll system is calculating on qualifying earnings, paying within 7 business days of each payday, and classifying termination payments and contractor invoices on the current rules. If you are not sure your settings are right, have a lawyer or accountant review one full pay cycle before the ATO does.