Qualifying earnings are the types of employee earnings that employers must use to calculate the Superannuation Guarantee (SG) contributions under the Payday Super reforms, which start from 1 July 2026. It is made up of base salary and wages, ordinary time earnings (OTE), and other relevant payments.
What happened to ordinary time earnings (OTE)?
Ordinary time earnings (OTE) were the previous definition used to calculate super contributions, back when employees’ superannuation guarantee (SG) contributions were due quarterly.
Now that super payments need to be paid out at the same time as salary and wages under Payday Super, OTE doesn’t capture all the components used to calculate the SG.
OTE has now been ‘absorbed’ into QE, and businesses will need to calculate their employees’ super guarantee (SG) contributions using QE.
It’s worth noting that for many employers, the salary and wages that they pay superannuation on may not change at all.
Payments Included In Qualifying Earnings (QE)
Qualifying earnings include a long list of pay items:
- Base salary and wages: Payments for employees’ ordinary hours of work and other amounts such as casual loading, shift penalties (holiday loading), daily rates, etc.
- Paid leave: This includes paid annual leave, sick leave, personal leave, carers leave, long service leave, etc.
- Allowances: Not all allowances (i.e. expense allowances) are used; only those that pertain to skilled work, on-call, adverse conditions, and retention.
- Lump sum payments: Payments in arrears, return to work, and some termination payments (like payments in lieu of notice).
- Commissions and bonuses: All commission and bonus payments, including commissions relating to work performed outside ordinary hours (previously weren’t included as part of the SG calculation).
What isn’t included in qualifying earnings?
There are more than a few items that aren’t included in qualifying earnings:
- Paid parental leave: Maternity, paternity, and adoption leave, both government and private.
- Expense allowances: Allowances with the reasonable expectation that the employee would pay for them in the course of providing their services (like meal allowances).
- Overtime payments: Any payments that extend beyond or outside of ordinary hours of work, time in lieu, etc.
- Termination payments: Severance, redundancy compensation for job loss, unused leave on termination, etc.
Important tip: Some pay items (e.g. salary-sacrificed super contributions) have components that contribute to qualifying earnings and others that don’t.
For more information, consult the ATO’s QE page.
Qualifying earnings example
To help understand what Qualifying earnings look like, here is an example:
Jonathan is a barista and works for a cafe. He is part-time, working 30 hours a week. He is paid $35.00/hr. He is not on any award or enterprise agreement, and he is paid weekly.
At the end of the week, he is paid $1,050.00
The superannuation guarantee is 12% of qualifying earnings. Jonathan’s employer’s super contribution comes to $126.00.
Marty, his boss, pays Jonathan for his work using payroll software. On top of salary and wages, Marty pays Jonathan his super contribution on the same day as ‘payday’ into his nominated super fund. Jonathan’s super fund receives the payment within the 7-business-day deadline.
Reporting, STP and Payday Super compliance
Reporting for single touch payroll (STP) is slightly different under Payday Super. STP will report:
- Qualifying earnings
- PAYG withholding
- Super liability
- Other relevant payments (not QE related)
To stay compliant and Payday Super ready, you (and your payroll software) will need to include these three components when reporting to the ATO.
Qualifying earnings and your business
From 1 July 2026, all employers will use qualifying earnings to calculate paying superannuation contributions. The consequences for missed, late, or unpaid super is the superannuation guarantee charge (SGC). To avoid penalties, make sure that you read up on the compliance rules for Payday Super and follow our checklist.
