For many employers, superannuation guarantee (SG) contributions are simply part of payroll. The percentage is calculated, payments are processed, and the process repeats each quarter.
Yet we often find that superannuation compliance is not as straightforward as it first appears.
Errors usually don’t arise from avoidance. They arise from misunderstanding – particularly around eligibility, timing, and what counts as ordinary time earnings.
February is a useful time to review superannuation processes. The year is underway, payroll patterns have settled, and there is space to correct issues before multiple quarters accumulate.
Understanding Your Core Obligation
Under current legislation, employers must contribute a prescribed percentage of an eligible employee’s ordinary time earnings (OTE) to a complying super fund by the quarterly due dates.
While that sounds simple, questions frequently arise around:
• What payments count as ordinary time earnings
• Whether contractors are deemed employees for SG purposes
• How bonuses and overtime are treated
• When contributions are considered “paid”
Each of these details matters. Small misunderstandings, repeated over several quarters, can result in significant catch-up liabilities.
Ordinary Time Earnings – Where Mistakes Happen
Ordinary time earnings generally include an employee’s base salary or wages, plus certain allowances, commissions and loadings. However, overtime payments are usually excluded.
The difficulty arises where payroll categories are not clearly defined. For example, allowances paid regularly may unintentionally be excluded from SG calculations if payroll systems are not configured correctly.
We often recommend reviewing payroll software settings annually to ensure earnings categories are mapped accurately. This is particularly important for businesses that have recently implemented new systems or changed software providers.
Clear configuration prevents quiet compliance issues from developing.
IMPORTANT NOTE: From 1 July 2026, the calculation base will shift from ordinary time earnings to what is referred to as “qualified earnings” under the new Payday Super framework. This change will require employers to reassess how payroll categories are defined and ensure systems are configured to align with the updated earnings base.
Contractors and Deemed Employees
Another area that requires attention is contractor arrangements.
Even where an individual is engaged as a contractor and invoices through an ABN, superannuation guarantee obligations may still apply if the contract is wholly or principally for labour.
This is common in industries such as trades, primary production, equine services and even professional consulting arrangements. The label “contractor” does not automatically remove SG responsibility.
A review of contractor agreements can provide clarity. Where SG applies but has not been paid, the Superannuation Guarantee Charge (SGC) can be significantly more costly than the original contribution, as it includes interest and administrative penalties.
Early identification is far preferable to correction after an ATO review.
Timing of Contributions
Superannuation contributions currently must be received by the employee’s fund by the quarterly due date – not merely processed in payroll by that date.
We regularly see contributions initiated close to deadline but clearing after the cut-off, particularly where clearing houses are used. This can inadvertently trigger late payment penalties.
Establishing a habit of processing contributions at least one to two weeks before the due date provides a buffer and reduces risk.
IMPORTANT NOTE: From 1 July 2026, employers will be required to pay Superannuation Guarantee on every payday rather than quarterly. Contributions will need to reach employee funds within seven business days of each pay run under the new Payday Super rules.
Record Keeping and Reconciliation
Accurate record keeping is essential. Employers should retain:
• Evidence of payments made to super funds
• Payroll reports detailing SG calculations
• Employment agreements outlining pay structures
• Contractor agreements where relevant
Quarterly reconciliation between payroll reports and super payments can identify discrepancies early. When reconciliations are left until year end, correction becomes more complex.
For growing businesses – particularly medical practices, vineyard operations, and trade companies with expanding teams – payroll complexity increases quickly. A system that worked for three employees may not be adequate for fifteen.
Common Compliance Risks
Some of the more common issues we encounter include:
• Super not being paid on bonuses when required
• Contractors incorrectly treated as exempt
• Salary sacrifice arrangements miscalculated
• Contributions processed late due to cash flow timing
• Payroll software incorrectly categorising allowances
None of these issues are unusual. Most arise gradually and without intention. Regular review reduces the likelihood of accumulating liabilities.
A Practical February Review
February provides an opportunity to step back and confirm that systems are functioning as intended.
A practical review might include:
• Confirming SG rates are correctly updated in payroll
• Reviewing contractor arrangements
• Reconciling the most recent quarter’s payments
• Ensuring contributions are clearing before due dates
• Checking that salary sacrifice arrangements are documented properly
These steps do not require extensive time, but they can prevent significant remediation later.
Supporting Compliance with Clarity
Superannuation guarantee compliance is part of responsible employment practice. When managed consistently, it becomes routine and predictable. When overlooked, it can create avoidable pressure.
At Palfreyman CA, we work with employers to ensure payroll systems reflect current legislation and operate smoothly. Clear systems protect both employers and employees. And like most areas of compliance, superannuation works best when reviewed steadily rather than urgently.
