Most Australian employers have to pay superannuation. If you employ anyone, full-time, part-time or casual, the superannuation guarantee (SG) requires you to contribute at least 12% of their earnings into a complying super fund. It is not a perk you can skip, a wage you can negotiate around, or an item you can quietly leave out of payroll. It is a legal obligation enforced by the Australian Taxation Office (ATO), and getting it wrong costs more than catching up on the missed amount.
This guide sets out the obligation in four parts: who you must pay super for, how much, when, and what happens if you do not. The rules changed substantially on 1 July 2026, when the new payday super regime began, so the article covers the current position and the traps that come with the change.
Who you must pay super for
Superannuation guarantee applies to anyone who is your employee for SG purposes. That category is broader than you might expect, because the Superannuation Guarantee (Administration) Act 1992 (Cth) (the SGAA) defines who counts as an employee by reference to the reality of the working relationship, not just the label on the contract.
Working through the ATO's eligibility guidance, you pay super for a worker if they are:
- An employee: full-time, part-time or casual, whatever the hours. The old rule that workers had to earn at least $450 in a month was removed from 1 July 2022, so even small or irregular engagements count.
- Under 18: you pay super only if they work more than 30 hours in a week, and the hours are counted in the actual week, not averaged across a fortnight or month.
- A contractor paid mainly for their labour: under s 12(3) of the SGAA, a person working under a contract that is wholly or principally for their labour is an employee. An ABN and invoices do not remove the obligation. You calculate super on the labour component of what you pay them.
- A company director: under s 12(2) of the SGAA, a director who is entitled to payment for their duties as a member of the board is an employee for super purposes.
- Other workers: temporary residents and working holiday makers, family members working in the business, and domestic or private workers such as nannies and housekeepers (the last group only if they work more than 30 hours a week).
You do not pay SG for yourself if you are a sole trader or in a partnership, and there is a limited opt-out for high-income earners who work for multiple employers and have successfully applied to the ATO for an exemption certificate.
The classification questions, employee versus genuine contractor, are where small businesses most often go wrong, and the answer affects far more than super. Getting the label right in a contract matters, but the substance of how the work is performed is what the ATO and the courts look at.
How much super you must pay
The minimum SG contribution is 12% of the worker's qualifying earnings. Section 17A of the SGAA sets the charge percentage at 12, and the ATO confirms the 12% rate applies from 1 July 2025. You can pay more under an award or enterprise agreement, but not less.
Since 1 July 2026 the calculation base is qualifying earnings, defined in s 10A of the SGAA. Qualifying earnings brings together ordinary time earnings (OTE) and other payments, and includes:
- ordinary time earnings: payments for the worker's ordinary hours of work, including casual loading, shift penalties, most allowances and bonuses paid for ordinary hours
- all commissions: including, for the first time from 1 July 2026, commissions for work done entirely outside ordinary hours
- salary sacrifice amounts: super must still be calculated on the amount before it was sacrificed
- other payments: fees for directors, and the labour component of payments to contractors covered by s 12(3).
The ATO publishes a detailed table of what counts as qualifying earnings. Payments that are generally not included are:
- genuine overtime, provided the worker's ordinary hours are clearly identified in an award or agreement (if they are not, the hours actually worked are treated as ordinary hours and do count)
- allowances paid purely to cover expenses the worker incurs
- government paid parental leave, and unused annual or long service leave paid out on termination.
For most employers, the move from OTE to qualifying earnings did not change the amount of super they pay. The notable extension is commissions for work performed entirely outside ordinary hours, which previously sat outside OTE and now count. If you pay sales incentives, performance bonuses or piece rates, it is worth checking how they are treated in your payroll rather than assuming they fall outside the base.
Pay super into the right fund
Paying the right amount on time is only part of the obligation. The contribution must reach a complying super fund, and it must reach the fund the worker is entitled to use.
Eligible employees are entitled to choose their super fund. You must give them a standard super choice form and act on their selection. If an employee has not chosen a fund, you can request details of their stapled super fund from the ATO, and since 27 March 2026 you can do this at the same time as you provide the choice form. Where there is no chosen fund and no stapled fund, you must have a default fund you pay into. Paying into the wrong fund is treated as not paying at all, so keeping fund details current matters as much as the payment itself.
When you must pay super
From 1 July 2026, the payday super regime requires you to pay super guarantee for each payday, and the contribution must be received by the employee's super fund within 7 business days of paying wages, with enough information for the fund to allocate it to the right member account. There are limited exceptions, such as for new employees, but the default deadline is tight.
Before 1 July 2026, super was due quarterly, with contributions required within 28 days of the end of each quarter on 28 October, 28 January, 28 April and 28 July. If you are still catching up on earnings paid before 30 June 2026, those quarterly deadlines continue to govern that period, and the old self-assessed super guarantee charge applies to it.
Two practical consequences of the change are worth noting. The Small Business Superannuation Clearing House closed on 30 June 2026, so you need another payment channel such as your payroll provider or your super fund's clearing service. And under payday super you report both qualifying earnings and super liability through Single Touch Payroll, rather than the pre-2026 reporting of OTE or super liability, so payroll software settings need to be updated rather than carried over.
What happens if you pay late or not at all
If contributions do not reach the fund within the deadline, you become liable to the super guarantee charge (SGC). From 1 July 2026 the SGC works differently from the old regime:
- it is assessed by the ATO, rather than self-assessed through a statement you lodge
- it is calculated on the unpaid qualifying earnings
- it includes interest that compounds daily at the general interest charge rate
- it includes an administrative uplift amount designed to cover enforcement costs and encourage employers to come forward early, which can be reduced if you have no history of ATO action and you lodge a voluntary disclosure
- penalties of 25% or 50% of the unpaid SGC apply, depending on whether you have had a prior penalty within the last 24 months.
One detail that surprises employers who remember the old rules: the pre-1 July 2026 SGC was not tax deductible, but the new SGC is. Do not read that as a reason to pay late. The compounding interest and the uplift still make a late payment far more expensive than paying on time, and the ATO prioritises collection of unpaid super. It receives employee referrals of unpaid super, can inform affected employees and former employees of any shortfall, and can take stronger action, including additional penalties, where an employer does not engage.
A compliance checklist for paying super
If you want a system that survives contact with the new deadlines, work through these steps:
- Classify every worker at the start: employee, contractor, director, and document the basis for the decision, because the substance of the arrangement is what counts.
- Offer choice of fund: give eligible employees a standard choice form, keep a record of their selection, and know your default fund.
- Calculate on qualifying earnings: set payroll to compute 12% on the right base each pay cycle, including commissions and salary sacrifice adjustments.
- Pay each payday within 7 business days: build the payment run into your pay cycle rather than treating super as an end-of-quarter task.
- Report through Single Touch Payroll: check that qualifying earnings and super liability are being reported correctly.
- Keep records: retain payroll reports, payment confirmations, choice forms and fund statements, because they are what you will need if the ATO ever asks.
- Review annually: rates and thresholds change, and the rules changed materially on 1 July 2026, so a yearly check against current ATO guidance is cheap insurance.
When you should get professional help
Super looks like an accounting task, but the decisions around it are legal. A lawyer can help you:
- Classify workers: advising on whether a contractor arrangement is genuine or whether the contract is wholly or principally for labour, and drafting contractor and employment agreements so the substance matches the label
- Draft pay arrangements: making offers and contracts clear about whether pay is base plus super or inclusive of super, and defining ordinary hours so that overtime is identifiable for super purposes
- Review payroll set-ups: checking that payroll and Single Touch Payroll settings apply the qualifying earnings rules correctly, particularly for bonuses, commissions and salary sacrifice
- Deal with the ATO: responding to an SGC assessment, lodging a voluntary disclosure to reduce the administrative uplift, and negotiating payment arrangements.
An accountant or bookkeeper can handle the calculations and lodgments; a lawyer is the right person where classification, contract drafting or an ATO dispute is involved, because those are questions of law, not arithmetic.
Start with the workers you call contractors
The most expensive mistake a small business can make is assuming that an ABN, an invoice or a casual label removes the super obligation. Section 12 of the SGAA looks through the label: if the contract is wholly or principally for the person's labour, you owe SG on the labour component, and under payday super you owe it within 7 business days of each payment. The second most common miss is the deadline itself, because a quarterly habit does not survive contact with a 7-business-day rule.
This week, list everyone you paid in your last pay cycle and answer two questions for each person: is this worker an employee or contractor for super purposes, and did super reach the right fund within 7 business days? If the answer to either question is uncertain, that is the point to get advice, before the ATO forms its own view.