Ordinary time earnings (OTE)¶

Ordinary time earnings, usually shortened to OTE, is a term the Australian Taxation Office (ATO) uses. It means the amount an employee earns for their ordinary hours of work — their normal working hours, as set out in an award or agreement.

OTE matters for one big reason: it is the base the ATO uses to work out how much super an employer must pay. Super is the money set aside for an employee's retirement. Get OTE right and the super amount will be right too.

In one line

Ordinary time earnings (OTE) is what an employee earns for their ordinary hours of work — the base the ATO uses to work out super, and it generally excludes overtime.

Why this matters¶

Super is worked out on OTE, not on the whole gross pay. So knowing what counts as OTE is what keeps super correct. If overtime is wrongly counted as OTE, super is overpaid; if an allowance that should count is left out, super is underpaid. Either way, getting OTE right protects both the employer and the employee.

What you will learn¶

What ordinary time earnings (OTE) means
Why OTE matters for working out super
Which common payments are and are not OTE

Understanding the concept¶

Ordinary hours of work are an employee's normal hours, usually set in their award, agreement or contract. Ordinary time earnings is what they are paid for those hours.

The ATO explains that OTE is usually the amount an employee earns for their ordinary hours of work. Importantly, the ATO says OTE includes things like commissions, shift loadings and some allowances — but not overtime payments.

The key contrast is with salary and wages, which is a wider term. The ATO explains that salary and wages are similar to OTE but also include overtime. So the difference between the two, in most pay runs, is the overtime.

What is generally OTE

Pay for ordinary hours of work
Commissions
Shift loadings
Some allowances (those that reward work, not those that only cover an expense)
Certain bonuses and some paid leave

What is generally not OTE

Overtime — the ATO explains that overtime payments are not OTE, as long as the ordinary hours are clearly identified in an award or agreement.
Expense allowances — an allowance that is really a reimbursement for a cost the employee is expected to spend (for example, a tool allowance expected to be spent on tools). The ATO explains these are not OTE.
Reimbursements — paying an employee back for an actual expense they have already incurred.
Certain payments made when employment ends.

One catch worth knowing: the ATO explains that overtime is only left out of OTE when the ordinary hours can be clearly identified. If overtime cannot be clearly separated from ordinary hours, all the hours worked may be treated as ordinary hours — and count towards OTE.

For accountants & bookkeepers

The ATO publishes a list of payments that are OTE and a separate list of payments that are not, and the distinction flows straight into the super calculation and Single Touch Payroll reporting. The expense-allowance test turns on whether the payment is a reward for services or a reimbursement the employee is reasonably expected to fully expend — the label on the pay item is not decisive. Where ordinary hours are not clearly identified in the instrument, hours that would otherwise be overtime can fall into OTE, so map each pay item's super treatment deliberately rather than by name.

Example¶

Alex works a standard 38-hour week plus a few hours of overtime, and receives a shift loading for working evenings. In one pay period Alex also earns a commission.

To work out the super, the amounts are sorted into what is OTE and what is not. Alex's ordinary hours, the evening shift loading and the commission are all OTE, so they count towards the super. The overtime hours are not OTE, so they are left out of the super calculation — even though they are still part of Alex's gross pay and are still taxed. The result: Alex's super is worked out on the OTE portion, not on the full gross pay.

Common mistakes¶

Working out super on the whole gross pay — super is based on OTE, which generally excludes overtime.
Assuming every allowance is OTE — an allowance that only covers an expense is generally not OTE.
Treating overtime as OTE when it should be excluded — this generally overstates super.
Forgetting that if ordinary hours are not clearly identified, overtime hours can end up being counted as OTE.

How this works in myaccountant¶

In the app — each pay item you set up has a category, and myaccountant uses that category to decide whether the amount counts towards OTE. When you run a pay run, the app works out super on the earnings that are OTE and leaves out the ones that are not (such as overtime). The pay run and payslip show the pay items, and the super amount is worked out on the OTE portion.

Key points¶

Ordinary time earnings (OTE) is the ATO term for pay for an employee's ordinary hours of work.
OTE is the base the ATO uses to work out super.
OTE generally includes ordinary pay, commissions, shift loadings and some allowances.
Overtime is generally not OTE, as long as ordinary hours are clearly identified.
Expense allowances and reimbursements are generally not OTE.
Working out super on OTE, not on the whole gross pay, is what keeps super correct.

Learn next¶

General information only — not tax, super or financial advice.

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