Overtime and super¶

A common question is whether super has to be paid on overtime. The short answer from the ATO is: generally no — but only if the employee's ordinary hours of work are clearly set out. If they are not, the position can change.

This lesson explains when overtime is out for super, and the important catch that can pull overtime hours back in.

In one line

Overtime is generally not OTE, so no super applies — provided the employee's ordinary hours are clearly identified in an award or agreement.

Why this matters¶

Overtime can be a big part of some employees' pay. Whether super applies to it is not a matter of choice — it depends on how clearly the employee's ordinary hours are defined. Get the ordinary hours definition wrong and overtime you thought was super-free can attract super.

What you will learn¶

Why overtime is generally not OTE
Why ordinary hours must be clearly identified
When all hours worked may be treated as ordinary hours

Understanding the concept¶

Super is worked out on ordinary time earnings (OTE) — broadly, pay for ordinary hours of work. Overtime is pay for hours worked outside ordinary hours, so the ATO treats overtime payments as not OTE. That means super generally does not apply to overtime.

There is one important condition. The ATO says overtime is not OTE provided the employee's ordinary hours of work are clearly identified in an award or agreement. In other words, you must be able to point to what the ordinary hours are, so the overtime can be separated out.

If the overtime amounts cannot be distinctly identified — for example, there is no clear split between ordinary hours and extra hours — the ATO treats all the hours actually worked as the employee's ordinary hours. When that happens, the pay for all those hours is OTE, so super applies to it.

For accountants & bookkeepers

The trigger is whether overtime is distinctly identifiable, not what it is labelled. Where an award or agreement clearly sets ordinary hours, pay for hours beyond them (at penalty or ordinary rates) is not OTE. Where ordinary hours are not clearly identified, the ATO's position is that all hours worked are ordinary hours, so their pay is OTE. A single lump "hours worked" figure with no ordinary-hours boundary is the classic case that pulls everything in.

Example¶

Dan is a shift worker at Priya's cafe. His agreement clearly sets his ordinary hours at 38 a week. One week he works 38 ordinary hours plus 4 overtime hours at a penalty rate. Because his ordinary hours are clearly identified, the overtime is not OTE — Priya works super out on the 38 ordinary hours only, not the overtime.

Now compare a second worker whose arrangement just pays for "hours worked" with no ordinary hours set anywhere. Because there is no clear line between ordinary and extra hours, the ATO treats all the hours worked as ordinary hours. All of that pay is OTE, so super applies to the lot.

Common mistakes¶

Assuming overtime is always super-free — it is only out when ordinary hours are clearly set.
Paying a single "hours worked" amount with no ordinary-hours split, then leaving super off the overtime portion.
Relying on the "overtime" label alone instead of a clear ordinary-hours definition.

How this works in myaccountant¶

In the app — myaccountant classifies each pay item as super-attracting or not, so an overtime item can be set to sit outside OTE. It then works super out on the correct earnings each pay and applies the current rate. You still need your ordinary hours clearly defined for the overtime to be treated as out.

Key points¶

Super is worked out on OTE, and overtime is generally not OTE.
Overtime is out only if ordinary hours are clearly identified in an award or agreement.
If ordinary hours are not clearly identified, all hours worked can be treated as ordinary.
When all hours are treated as ordinary, super applies to the pay for all of them.
The test is whether overtime is distinctly identifiable, not what it is called.

Learn next¶

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

Did this answer your question?