Overtime and your superannuation

Many Australians work overtime, either to supplement their income or because it’s a requirement of their job role.

Overtime is generally paid at a higher rate than regular pay rates, so it can be great to work those extra hours here and there, and earn more to pay living expenses, pay down debt, or save towards financial goals.

Paying your overtime earnings towards superannuation to grow your future retirement income is another reason why some people work overtime.

If you’re a UniSuper member, the amount of super you’re paid is different depending on what product you’re in. This in turn may impact if you’re paid super on overtime. If you’re in the Defined Benefit Division (DBD) or Accumulation 2, your employer will pay super contributions based on the definition of ‘salary’ in our Trust Deed, which excludes overtime.

This article is more relevant if you’re an Accumulation 1 or Personal Account member as your contributions are likely to be based on the Superannuation Guarantee (SG), which is based on Ordinary Time Earnings (OTE)—but still depends on individual employment conditions.

The information in this article is only a general summary of some material published by the ATO here. For advice related to your circumstances, we recommend you seek legal advice.

In this article, you'll understand if super is paid on overtime, any exceptions, as well as ways to grow your super.

Is super paid on overtime?

Super is generally not paid on overtime, as it’s in excess of Ordinary Time Earnings (OTE). This is the case regardless of how frequently you work overtime.

Your employer is generally required to pay an extra 10% of your OTE into super. It’s called the ‘Superannuation Guarantee’ (SG).

What’s considered Ordinary Time Earnings (OTE)?

OTE is the amount you earn for the ordinary hours you work. It includes:

• some leave contributions (annual, sick, long service)
• casual shift loadings
• some allowances (such as danger allowance or on-call allowance)
• back pay
• commissions
• bonuses

There may be exceptions to the above. For full details on what the ATO considers to be OTE and when the super guarantee applies, see the ATO’s list of payments that are ordinary time earnings page.

Are there exceptions to the ‘no super on overtime’ rule?

There are circumstances where overtime work is considered to be OTE. These exceptions include:

• if overtime hours can’t be clearly identified, then all hours may be classified as OTE.
• where you are paid piece-rates, which may be treated the same as OTE for super guarantee purposes.
• when a business has registered an Agreement that overrides an industry or occupation Award, and this agreement stipulates that super is paid on overtime. (See Fair Work’s Awards and Agreements page for more information.)

Can you still grow your super if you do a lot of overtime?

Yes, you can grow your super with overtime earnings. If you’re working overtime hours, you may be able to use these extra earnings for immediate living expenses, and direct more of your salary towards your super, via voluntary super contributions.

1. You can make contributions from your pre-tax salary, known as ‘salary sacrifice’, these concessional contributions are additional to your SG, and are taxed at 15% in your super fund, which is generally a lower rate than income tax.

   You can make up to $27,500 in pre-tax concessional contributions each year, however caps vary if you carry forward unused concessional contributions from previous years. For more information, see the Concessional contributions and contributions caps page on the ATO website.

2. You can use the money you earn from overtime to make personal after-tax contributions to your super.

   Generally, you can make up to $110,000 in personal after-tax super contributions each year. Higher caps may apply in certain cases. See Non-concessional contributions and contribution caps on the ATO website for more information.

In summary…

It’s always a good idea to seek independent financial advice to find out if you’re better directing your overtime earnings towards super or paying off immediate expenses and debts (such as your mortgage) first.

If you’re able to use overtime earnings towards super, this can really make a big impact on your long-term super savings and future retirement lifestyle.