chalkline. Snap the line. Build to it.
glossary Glossary 4 min read

Ordinary Time Earnings (OTE)

OTE is wages for normal hours including most allowances but excluding overtime. Super at 12% is paid on OTE, not gross wages. Common confusion in apprentice payroll.

By Chalkline. Last updated 14 May 2026. Verified 14 May 2026.

Ask Chalkline about this →

Ordinary Time Earnings (OTE) is the wage base used to calculate the Superannuation Guarantee (SG) contribution owed by an employer for an employee. Defined under the Superannuation Guarantee (Administration) Act 1992 (Cth) and clarified by ATO Superannuation Guarantee Ruling SGR 2009/2, OTE is normal hours wages plus most allowances, with overtime loadings excluded.

SG rate is 12% from 1 July 2025 onwards (the final step in a stepped increase from 9% to 12% over 2014-2025). SG is calculated on OTE, not on gross wages.

What’s IN OTE (super applies):

  • Normal hours wages: hourly rate × normal hours, or salary equivalent.
  • Annual leave taken while still employed (paid leave).
  • Personal/carer’s leave taken while still employed.
  • Long service leave taken while still employed.
  • Allowances for skill, tool, motor vehicle (in many cases), site, dirt, height, first-aid, leading hand. Most allowances paid for ordinary hours qualify.
  • Commissions and bonuses for ordinary work performance.
  • Workers compensation payments while still employed.

What’s OUT of OTE (super does NOT apply):

  • Overtime hours worked beyond ordinary hours, when paid at penalty rates (1.5×, 2×).
  • Overtime allowances specifically tied to overtime work (overtime meal allowance, etc.).
  • Annual leave loading (the 17.5% extra paid on annual leave taken), unless the leave loading is paid in lieu of overtime entitlement that would otherwise have been worked.
  • Lump sum payments on termination: unused annual leave, unused long service leave, redundancy pay, ETP.
  • Reimbursements of actual expenses (e.g. fuel receipts, tool replacement claims).

The “lump sum on termination” nuance. Even though wages, leave, and similar are normally OTE, when paid as a lump sum at the time the employee leaves, they fall outside OTE. The employer does not pay SG on the unused annual leave or LSL paid out at termination.

Common builder OTE errors:

  • Paying SG on gross wages including overtime: technically overpayment, the employee benefits but the employer wastes cash.
  • NOT paying SG on tool allowance: the most common under-payment. Tool allowance is paid for ordinary hours and IS OTE.
  • NOT paying SG on leave loading: the rule has a nuance (see SGR 2009/2). The default is that leave loading IS OTE unless it’s specifically a payment in lieu of forgone overtime; most awards make this distinction unclear. If in doubt, treat leave loading as OTE.
  • Including overtime allowance in OTE: the meal allowance paid for working overtime is NOT OTE.

Apprentices and OTE. The same rules apply to apprentices as to qualified tradespeople. Apprentice wage rates are lower, allowances vary by training year, but the OTE calculation method is identical. Tool allowance paid to a 1st-year apprentice IS OTE.

For builders.

  1. Configure payroll software (Xero, MYOB, KeyPay) to calculate SG on OTE correctly. Most ship with sensible defaults but tool allowance setup is a common error.
  2. Audit your SG calculations annually with your BAS agent or accountant. Errors compound at 12% per pay period.
  3. Stay current with SGR 2009/2 updates. The ATO occasionally issues clarifications on edge cases (e.g. specific allowance treatments).

Also known as: OTE, OTE wages, super-bearing wages.

Category: Business / payroll / superannuation.

See also

Last updated: 2026-05-14. Verified: 2026-05-14.

Related articles