Is Superannuation Paid on Workers Compensation?

Superannuation and workers’ compensation are important financial safeguards for Australian workers. Superannuation focuses on retirement savings, while workers’ compensation provides support for work-related injuries or illnesses. Understanding how these two systems intersect is important, as rules governing superannuation contributions on workers’ compensation payments are not always straightforward.

Superannuation and Workers’ Compensation: The Standard Approach

Superannuation, often referred to as “super,” is a system designed to help Australians save for retirement. Employers contribute a percentage of an employee’s earnings into a superannuation fund, which is then invested to grow over time until the employee reaches retirement age. As of July 1, 2025, the mandatory minimum Superannuation Guarantee (SG) contribution rate is 12% of an employee’s ordinary time earnings, paid by the employer.

Workers’ compensation is a form of insurance that offers financial support to employees who become injured or ill because of their work. Under Australian law, employers are required to hold this insurance to cover their workers. This system provides benefits such as covering lost wages during recovery, medical and hospital costs, rehabilitation treatments, and in some cases, lump sum payments for permanent impairment.

The general principle is that Superannuation Guarantee contributions are not required on workers’ compensation payments. This is because weekly workers’ compensation payments for lost earnings are considered compensation for an injury or illness, rather than “ordinary time earnings” from employment. The Australian Taxation Office (ATO) does not define these payments as “salary or wages” for superannuation purposes, as they are not a reward for services rendered.

The Superannuation Guarantee (Administration) Act 1992 specifies that superannuation contributions are calculated based on an employee’s “ordinary time earnings” (OTE). OTE includes earnings for ordinary hours of work, such as base salary, wages, certain allowances, commissions, and paid leave. Since workers’ compensation payments for time not working are not considered OTE, employers have no obligation to pay superannuation on them. This applies to common types of workers’ compensation benefits like weekly payments for lost wages, medical expenses, and lump sum payments for permanent impairment, none of which attract SG contributions.

Circumstances Where Superannuation May Be Required

While the general rule is that superannuation is not paid on workers’ compensation, there are specific situations where contributions may be required. The key determinant remains whether the payment qualifies as “ordinary time earnings” (OTE) under the Superannuation Guarantee laws. These exceptions often arise when an employee maintains some connection to work or receives payments structured in a particular way.

One common scenario involves a partial return to work. If an employee is receiving workers’ compensation benefits but also performs some work, such as light duties or reduced hours, superannuation is payable on the earnings from the actual work performed. Any payments made for these active work hours are considered OTE, and employers must pay superannuation on these earnings as they would under normal circumstances. This ensures that superannuation continues to accrue for the productive work undertaken.

Another situation involves employer “top-up” payments. Sometimes, an employer might make additional payments to an employee on workers’ compensation to bridge the gap between their workers’ compensation benefits and their pre-injury wage. Whether superannuation is required on these top-up payments depends on how they are structured and the reason for the payment. If these top-up payments are considered a form of regular earnings or are linked to hours the employee would work, they may classify as OTE and therefore attract superannuation contributions.

Specific employment agreements, such as modern awards or enterprise agreements, can also stipulate that superannuation is payable on certain workers’ compensation payments. These agreements can provide more generous conditions than the statutory minimum, requiring employers to continue superannuation contributions even while an employee is on workers’ compensation and not actively working. It is important to review the specific terms of any applicable award or agreement to understand these potential entitlements.

Employee and Employer Considerations

For employees navigating a work-related injury or illness, understanding their superannuation entitlements during workers’ compensation is important for their long-term financial well-being. Employees can monitor their superannuation contributions by reviewing their payslips, checking their superannuation fund statements, or accessing their Australian Taxation Office (ATO) online services through myGov. These resources provide visibility into whether contributions are being made and the amounts.

If an employee has questions or concerns about their superannuation payments while on workers’ compensation, direct communication with their employer or superannuation fund is a sensible first step. Employers have a responsibility to understand and meet their superannuation obligations, especially when employees are on workers’ compensation. While the primary focus for an injured worker is recovery, keeping accurate records of workers’ compensation payments and any superannuation contributions received during this period can prove beneficial.

For complex situations or when clarification is needed, seeking professional advice is recommended. The Australian Tax Office (ATO) provides guidance on superannuation obligations, and an employee’s superannuation fund can offer specific details about their account. Additionally, legal or financial professionals specializing in workers’ compensation or superannuation can provide tailored advice based on individual circumstances. This guidance can help ensure all entitlements are understood and fulfilled.