August 30 2023

Do you get paid super on bonuses?

Most Australians are familiar with the super contributions that come with their regular pay. But how does it work if you get paid a bonus? Keep reading to understand what is considered a bonus and whether you might be entitled to super on bonuses.
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What is a bonus?

A 'bonus payment' is like a special pat on the back, but in cash. It's an extra chunk of money your employer might give you on top of your usual pay.

So, why would an employer give you a bonus? Here are a few common reasons:

  • you've smashed your job goals or sales targets (performance bonus)
  • your boss wants to give you an incentive to stick around (retention bonus)
  • a new employer wants to sweeten the deal to get you to join their team (sign-on bonus)
  • your employer wants to reward you at the end of the year (often called an annual or Christmas bonus)

Does an employer need to pay superannuation on bonuses?

Employers need to pay super on bonuses if certain requirements are met. Under the superannuation guarantee (SG) rules, if your bonus counts as 'ordinary time earnings', then your employer has to make a super contribution for that bonus. For the 2023-24 financial year, that’s a minimum super contribution of 11%, though they may choose to contribute more than this if they want to.

So, let's say you score a bonus for the awesome work you've done during your regular work hours. In that case, your employer can't just give you a pat on the back and the extra cash. They've also got to make a contribution to your super – just like they do with your everyday pay.

What are ordinary time earnings?

Ordinary time earnings are the amount you earn for your ordinary hours of work. It’s used to work out the minimum super contribution that your employer must pay.

Now this might sound fairly straight-forward and you might think of your pay as simply what you see in your bank account every payday. But remember that what you receive from your employer is made up of more than just your salary or wages.

Ordinary time earnings typically include:

  • pay for your ordinary hours of work
  • annual leave
  • bonuses (excluding those associated with overtime)
  • commissions
  • shift loadings

However, there are generally some exclusions like:

  • overtime pay (provided your ordinary hours of work are clearly identified)
  • expense allowances
  • reimbursements of expenses.

For more information on ordinary time earnings, visit the Australian Taxation Office (ATO) website here.

Which types of bonus payments qualify for super contributions?

Not all bonuses are created equal when it comes to super. Let's break down which types of bonuses qualify for super contributions by your employer:

Performance bonus: If you've achieved certain performance targets or goals and earned a bonus for it, it qualifies for super contributions.

Christmas bonus: Worked hard all year and scored a little extra for being on the nice list? That also qualifies for a super contribution.

‘Ex gratia’ bonus for work done in your ordinary work hours: This is a fancy name for a bonus that your employer didn't have to give you, but they did so to reward you for work done during ordinary hours. Even though this is a discretionary bonus, it still qualifies for super contributions.

When is an employer not required to pay super on a bonus?

There's one important exception to the super on bonuses rule: overtime. If you get a bonus for work that you did entirely outside of your ordinary working hours, your employer doesn't have to pay super on it.

For example, if all your work on a project was done in your overtime only and you got a bonus for it, that bonus wouldn't require a super contribution from your employer. However, if you receive a bonus for nailing a project that you worked on in both your overtime and ordinary hours, your employer is required to make a super contribution on that bonus because it is sufficiently connected with your ordinary hours of work.

Additionally, there's a limit per quarter on how much you can earn and still be eligible for the SG – this is known as the maximum super contribution base (MSCB). If you get a big bonus, and it pushes your income above the limit for the quarter, then your employer doesn’t have to pay any super for the amount over that limit. However, they can still choose to do so if they want to. For more details about the MSCB, check the ATO website.

So, the next time you receive a bonus, it's worth considering whether it will contribute to your superannuation. It's not just about the immediate gain but also how it may help enhance your future retirement.

Summary table of super on bonuses

Bonus payment type Qualifies for super?  
Performance bonus Yes  
Christmas bonus Yes  
Bonus labelled as ex gratia but in respect of ordinary hours work Yes  
Bonus in respect of overtime only No  

For a more detailed list of bonus and other payment types, visit the ATO website.

Did you know that you may be able to choose to salary sacrifice your bonus payments?

Speak with a Rest Adviser about making additional contributions and for advice on setting up an effective salary sacrifice arrangement.

Learn more about Rest Advice

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