Super changes as from July 1

Changes to the Superannuation Guarantee Contribution legislation, which take effect from next month will change the way in which SGC contributions are to be calculated by employers.

Currently employers are required to make minimum SGC contributions of 9% of each employee's 'notional earnings base', for example as defined under an applicable industrial award.

However from 1 July, employers must make minimum SGC contributions of 9% of each employee's 'ordinary time earnings' ('OTE'). For employers currently using an earnings base for calculating SG contributions that is less than the OTE definition, this may result in significantly increased superannuation costs to the employer.

OTE is defined as the total of an employee's earnings in respect of ordinary hours of work. Importantly, this includes over-award payments, shift-loadings and commission. OTE does not include lump sum payments in lieu of unused sick leave, annual leave or long service leave made to an employee on termination of employment or earnings in excess of the maximum superannuation contribution base.

The maximum contribution base for the financial year 1 July 2008 to 30 June 2009 is $38,180 per quarter. This means that employers do not have to provide the minimum superannuation support for the part of an employee's earnings in excess of this quarterly limit.