Leave payments and super¶

When an employee takes paid leave, they still get paid — and super usually still applies. The general rule is that paid leave an employee takes while still employed is ordinary time earnings, so super is worked out on it.

Why this matters¶

Employees often expect their super to keep building while they are on leave, and in most cases it does. Getting leave right means an employee's super does not quietly stop during holidays or sick days, and you are not left owing a shortfall.

What you will learn¶

• Why paid leave taken while employed attracts super
• How annual leave loading is treated for super
• The exception that can take leave loading out of ordinary time earnings

Understanding the concept¶

Super is worked out on an employee's ordinary time earnings (OTE) — what you pay them for their ordinary hours of work.

The ATO treats paid leave taken while an employee is still employed as ordinary time earnings. This covers annual leave, sick or personal leave, and long service leave taken during employment. So while an employee is on that leave, super applies to the leave pay, just as it would to their ordinary pay.

Annual leave loading is an extra amount some employees are paid on top of their base pay while on annual leave. The ATO treats annual leave loading as ordinary time earnings too — so super generally applies to it.

There is one exception. Leave loading is not ordinary time earnings if you can show it is paid to make up for a lost opportunity to work overtime while on leave. The ATO requires written evidence showing the loading is linked to lost overtime. Without that evidence, treat the loading as ordinary time earnings.

One thing this lesson does not cover is leave that is paid out when employment ends — for example, unused annual leave paid on termination. That is treated differently and is covered in the termination lesson.

Example¶

Tom is a nurse and takes two weeks of paid annual leave. He is still employed while on leave, so his annual leave pay is ordinary time earnings and super is worked out on it. The same applies when Tom later takes a paid sick day — that leave pay attracts super too.

Tom's pay also includes annual leave loading on top of his base pay while he is on annual leave. By default that loading is ordinary time earnings, so super applies. It would only be left out of ordinary time earnings if his employer could show, with written evidence, that the loading was paid for a lost opportunity to work overtime.

Common mistakes¶

• Stopping super while an employee is on paid leave — leave taken while employed is generally ordinary time earnings.
• Leaving super off annual leave loading — it is generally ordinary time earnings.
• Assuming leave loading escapes super without written evidence tying it to lost overtime.
• Treating unused leave paid out at termination the same as leave taken while employed — the termination case is different (see the termination lesson).

How this works in myaccountant¶

Key points¶

• Super is worked out on ordinary time earnings.
• Paid leave taken while still employed is generally ordinary time earnings.
• This covers annual leave, sick or personal leave, and long service leave taken during employment.
• Annual leave loading is generally ordinary time earnings, so super applies.
• Loading is only left out of ordinary time earnings with written evidence it is for lost overtime.
• Leave paid out at termination is treated differently — see the termination lesson.

Learn next¶

• What are ordinary time earnings?
• Termination payments and super
• Bonuses and commissions and super

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