How superannuation is calculated is one of the most common questions Australians ask as they move through their working life. Superannuation, or “super,” is your retirement savings system and understanding how contributions are worked out can help you plan better for the future.
In this guide, we’ll break down superannuation in simple terms: how it’s calculated, what contributions are included, and what factors influence your final balance.
What Is Superannuation?
Superannuation is a long-term savings system designed to fund your retirement. Instead of relying only on the Age Pension later in life, your employer (and sometimes you) put money into a super fund during your working years. This money is then invested and grows over time.
The key question is: how is that amount calculated?
How Superannuation Is Calculated: The Basics
In Australia, your super is mainly calculated as a percentage of your ordinary time earnings (OTE).
- As of 1 July 2025, the Superannuation Guarantee (SG) rate is 11.5%.
- This means your employer must pay 11.5% of your OTE into your super fund.
- OTE includes your regular salary, wages, allowances, and some bonuses.
👉 Example: If you earn $80,000 per year, your employer must contribute $9,200 (11.5%) into your super fund.
What Counts as Ordinary Time Earnings?
It’s important to understand what’s included and excluded when calculating super:
Included in OTE (super is calculated on these):
- Base salary or wages
- Shift loadings and allowances
- Most bonuses (unless irregular or discretionary)
- Commissions
- Paid leave (annual leave, sick leave, long service leave)
Not Included in OTE (super is not calculated on these):
- Overtime pay
- Expense reimbursements
- Redundancy payments
- Some allowances (like meal or travel reimbursements)
How Super Grows Over Time
Superannuation is more than just contributions it’s also about growth. Once contributions are paid into your fund, they are invested across shares, property, bonds, and cash depending on your chosen investment option.
Your super balance grows through:
- Employer contributions (the SG rate).
- Voluntary contributions you make (before or after tax).
- Investment returns (depending on your fund’s performance).
- Tax benefits (contributions and earnings are often taxed at concessional rates).
Factors That Influence How Super Is Calculated
Several factors can change how much super you receive over your lifetime:
1. Your Salary or Wages
The higher your income, the more your employer must contribute, because the Superannuation Guarantee is a fixed percentage of your ordinary time earnings. This means salary growth over your career has a direct impact on the size of your retirement savings.
2. Contribution Caps
The government places annual limits on how much can be contributed to super with concessional tax treatment. In 2025, the concessional cap is $30,000 (before-tax contributions like SG and salary sacrifice), while the non-concessional cap is $120,000 (after-tax contributions). Exceeding these caps may result in extra tax.
3. Age and Preservation Rules
Superannuation is designed for retirement, so it remains locked away until you reach your preservation age currently 60 for most Australians. You can only access it earlier in limited situations, such as severe financial hardship or permanent incapacity.
4. Investment Performance
Once contributions are in your super fund, they are invested across shares, property, bonds, or cash depending on your chosen option. The performance of these investments whether conservative or high growth plays a big role in how quickly your balance grows over time.
Example: How Superannuation Is Calculated for a Worker
Let’s take a simple case:
- Salary: $70,000 per year
- Superannuation Guarantee: 11.5%
- Employer contribution: $8,050 per year
Over 10 years (without salary increases and ignoring investment returns), this person would accumulate $80,500 in contributions. With compound investment growth of 6% annually, the balance could grow to around $110,000+ over the same period.
Maximising Your Superannuation
Understanding how super is calculated also helps you find ways to boost it:
- Salary sacrifice: Direct part of your pre-tax salary into super to grow faster and reduce tax.
- Spouse contributions: Add to your partner’s super to even out balances.
- Government co-contributions: Eligible low-income earners may receive top-ups when they make personal contributions.
- Review investment options: Choosing the right risk level can make a big difference over decades.
Key Takeaway
Superannuation in Australia is calculated as a percentage of your ordinary time earnings currently 11.5% from 1 July 2025. Your employer must pay this into your super fund, and over time it grows through investment returns and optional personal contributions.
By understanding how superannuation is calculated, you can make smarter choices today to enjoy a stronger retirement tomorrow.
FAQs
1. How is super calculated on my payslip?
Super is calculated at 11.5% of your ordinary time earnings in 2025. This usually shows up as a separate line on your payslip. If something looks off, check with your employer or super fund.
2. Do I get super on overtime?
No. Overtime hours are excluded from ordinary time earnings, so your employer doesn’t pay super on them. However, super is still paid on your base wages, allowances, and paid leave.
3. Can I add extra to my super?
Yes. You can boost your balance with salary sacrifice (before-tax contributions) or after-tax personal contributions. Both can help grow your savings faster, and some may come with tax benefits.
4. Is super taxed?
Yes, but at concessional rates. Employer contributions are taxed at 15% inside your fund, which is usually lower than most people’s income tax rate. Investment earnings inside super are also taxed at 15%.
5. Will the super rate increase again?
Yes. The Superannuation Guarantee is set to rise from 11.5% in 2025 to 12% by 2026. This means your employer will contribute more to your super automatically as the rate increases.
Superannuation may seem complicated, but at its core, it’s just a percentage of your wages set aside and invested for your retirement. By learning how it’s calculated and adding a few smart strategies you can take control of your financial future.
At Wealthlab, we help Australians maximise their super and prepare for retirement with confidence.
👉 Book a consultation today to review your super strategy and retirement plan.
Learn More About Retirement & Superannuation
https://moneysmart.gov.au/grow-your-super/how-much-super-should-i-have