Does Your Salary Include Superannuation?

Many individuals often wonder if their salary package includes superannuation. Understanding the components of remuneration is important for individuals to grasp their financial standing. This distinction clarifies how earnings are structured.

Understanding Salary and Superannuation

Salary is the regular payment an employee receives for their work, typically a fixed amount paid before deductions like income tax. It is the primary compensation for performing job duties, forming the basis of an individual’s take-home pay.

Superannuation, often called “super,” is a compulsory retirement savings scheme in Australia, distinct from an employee’s immediate take-home pay. Employers contribute funds into a superannuation account on behalf of their employees for their retirement.

Superannuation and Your Salary

In most employment arrangements, superannuation is paid in addition to an employee’s base salary, rather than being included within it. This means an advertised salary of, for example, $70,000, typically implies superannuation contributions will be calculated and paid on top of this amount. This is often expressed as “salary + super” in job advertisements.

Superannuation contributions are calculated based on an employee’s Ordinary Time Earnings (OTE). OTE encompasses an employee’s regular earnings for their ordinary hours of work, including base wages, commissions, and certain allowances. Payments for overtime, expense reimbursements, or certain lump sum payments upon termination are generally excluded from OTE. Understanding OTE is important because it dictates the earnings base upon which mandatory superannuation contributions are calculated.

Calculating and Paying Superannuation

Employers are legally required to contribute a minimum percentage of an eligible employee’s OTE as superannuation. From July 1, 2025, this Superannuation Guarantee (SG) rate is 12%. For example, if an employee’s OTE for a quarter is $10,000, the employer would contribute $1,200 (12% of $10,000) to their superannuation fund.

Employers must pay these superannuation contributions at least quarterly into a complying super fund. On a payslip, superannuation contributions are shown as a separate line item, distinct from gross or net pay, indicating the amount contributed for the pay period.

Impact on Your Total Compensation

Superannuation forms a key part of an individual’s total compensation package, which includes base salary, superannuation, and any other benefits. While superannuation is not part of an employee’s immediate take-home pay, it accumulates over time, contributing to long-term financial security. Recognizing superannuation as an integral component of overall remuneration is important for assessing job offers.

Understanding this distinction is important for personal wealth accumulation and retirement planning. Although employer contributions are mandatory, individuals can make additional voluntary contributions to their superannuation, such as through salary sacrifice arrangements. These options enhance retirement savings beyond mandatory employer contributions.