How Does Superannuation Work in Australia?

Summary

• As of 2026, employers must pay a minimum superannuation guarantee (SG) of 12% of an employee’s ordinary time earnings into a complying super fund on a quarterly basis.
• Super obligations apply to most workers, including casual, part-time, and temporary employees, and in some cases, contractors engaged principally for their labour.
• From 1 July 2026, Payday Super requires contributions to reach the employee’s fund within 7 business days of payday, replacing the quarterly payment model.
• This article is a plain-English guide to employer superannuation obligations in Australia, intended for business owners operating under Australian law.
• The content has been prepared by LegalVision, a commercial law firm that specialises in advising clients on employment law and superannuation compliance.

Tips for Businesses

Confirm which workers qualify for super before their first payday. Calculate SG on ordinary time earnings only, excluding overtime. Pay into the employee’s chosen or stapled fund. Keep records in English for seven years. From 1 July 2026, ensure contributions reach the fund within 7 business days of each payday.

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On this page

• Do I Need to Pay Superannuation?
• How Much Superannuation Do I Pay?
• Where Do I Pay Superannuation?
• When Do I Need to Pay Superannuation?
• What Is Changing From 1 July 2026?
• What Happens If I Do Not Pay Superannuation On Time?
• What Superannuation Payment Records Do I Need to Keep?
• Key Takeaways
• Frequently Asked Questions

If you are a new employer, the question “how does superannuation work?” may have crossed your mind. Superannuation is money an employer pays to provide for their employees’ retirement. In Australia, superannuation laws require employers to make minimum super contributions on behalf of their employees in certain situations. Nevertheless, some modern awards and registered agreements also contain additional terms for superannuation. Additionally, superannuation payments are tax-deductible against your business income. This article will help you understand superannuation by answering some commonly asked questions.

Do I Need to Pay Superannuation?

Generally, you need to pay super contributions into your employee’s super account in addition to their wages.

It is important to remember that superannuation may be payable regardless of whether your employee is a:

• full-time, part-time or casual employee;
• temporary resident;
• company director; or
• family member working in your business.

However, you can only pay your contractors super if they are wholly or principally engaged for their labour. A contract may be considered ‘wholly or principally for labour’ if the contractor:

• is paid mainly for their labour (i.e. more than half the dollar value of the contract is for their labour);
• is paid for their personal labour and skills (including physical, mental or artistic labour), rather than to achieve a result; and
• performs the work personally and cannot delegate the work.

How Much Superannuation Do I Pay?

The super guarantee (SG) is the minimum amount of super you must pay into an eligible employee’s super account. As of 2026, the SG rate is 12% of an employee’s ordinary time earnings (OTE). OTE is the amount your employee earns for their ordinary hours of work and may include commissions, shift loadings, allowances and bonuses, but generally excludes overtime payments.

Example of Superannuation Calculation

During this quarter, your employee’s OTE is $20,000. The minimum super you must pay into their super account is $20,000 × 12% = $2,400.

Where Do I Pay Superannuation?

You must pay super to a complying super fund. Indeed, most of your employees can choose their super fund. Your employee is eligible to choose their super fund if they are:

• employed under an award or registered agreement that does not require super support; 
• not employed under any award or registered agreement; or
• employed under an enterprise agreement or workplace determination made on or after 1 January 2021.

However, if your employee is not eligible to choose or does not make a choice, you should pay the super into your employee’s stapled super fund.

When Do I Need to Pay Superannuation?

You should calculate the SG for your eligible employees from the day they start with you. From that point, super payments need to be made at least four times a year. Therefore, your employee’s super fund should receive payments by the quarterly due dates. The current quarterly due dates are set out below.

You can choose to make super payments more frequently than once a quarter, provided your total SG obligation for the quarter is received by your employee’s super fund before the due date.

What Is Changing From 1 July 2026?

Under the new rules, super contributions must generally reach the employee’s nominated super fund within 7 business days of payday. Employers should prepare by reviewing their payroll systems, checking how their clearing house processes payments, and confirming that employee super fund details are up to date.

Payday Super does not change the superannuation guarantee rate. The SG rate remains 12% for salary and wages paid from 1 July 2025. What changes is when employers need to pay super and how quickly the contribution must reach the employee’s fund.

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What Happens If I Do Not Pay Superannuation On Time?

For missed or late SG payments before 1 July 2026, you may need to pay the superannuation guarantee charge (SGC) and lodge an SGC statement with the ATO. The SGC generally includes:

• the SG shortfall;

• nominal interest of 10% per year; and

• an administration fee of $20 per employee, per quarter.

What Superannuation Payment Records Do I Need to Keep?

You must keep records that show the amount of SG you paid for your employees and how it was calculated. Furthermore, you should show that you have offered your eligible employees a choice of a super fund. Additionally, it is important to remember that all records must be written in English and kept for at least seven years.

Key Takeaways

In conclusion, you need to ensure that you understand and comply with your requirements to pay super. The ATO provides a helpful list for employers to check their super obligations. You should check you are paying:

• super to all eligible workers;
• the correct amount, given you need to pay a minimum of 12% of your eligible employee’s ordinary time earnings for salary and wages paid from 1 July 2025;
• to your employee’s chosen super fund, or if your employee does not make a choice, into your employer’s stapled super fund; and
• on time, noting that quarterly due dates apply for periods ending on or before 30 June 2026, and Payday Super will require SG to be paid on payday from 1 July 2026.

You should also ensure you are checking accurate records. This is because records show that you have complied with your super obligations and need to be kept for seven years.

LegalVision provides ongoing legal support for all businesses through our fixed-fee legal membership. Our experienced employment lawyers help businesses manage contracts, employment law, disputes, intellectual property and more, with unlimited access to specialist lawyers for a fixed monthly fee. To learn more about LegalVision’s legal membership, call 1300 544 755 or visit our membership page.

Frequently Asked Questions