Qualifying Earnings

From 1 July 2026, Superannuation Guarantee (SG) will move to a Payday Super model. That means super must be calculated every pay run and reach your employees’ funds within 7 business days of payday.

Alongside the timing change, a new concept is being introduced: qualifying earnings (QE). This is the earnings base the ATO will use to work out how much SG you must pay. Understandably, many employers, bookkeepers and payroll admins are asking: “Is this just ordinary time earnings (OTE) with a new name – or something different?”

In this article, we’ll unpack qualifying earnings in plain English, show practical examples of what’s likely in and out, and outline some simple steps you can take now to get payroll ready for Payday Super.

Key takeaways

• From 1 July 2026, SG will be calculated and paid on a new earnings base called qualifying earnings (QE) as part of the Payday Super reforms.
• Based on current government design documents, QE is expected to align very closely with today’s ATO concept of ordinary time earnings (OTE).
• In practice, QE will generally include what employees earn for their ordinary hours of work, plus related loadings, allowances, commissions, bonuses and paid leave that are currently treated as OTE.
• Items that are usually not QE are the same things that are not OTE today – such as overtime, termination and redundancy payments, payouts of unused leave on termination, genuine reimbursements and most non‑cash fringe benefits.
• Until the ATO releases a dedicated QE schedule, the safest working rule is: “If a payment is currently treated as OTE, treat it as a strong example of qualifying earnings when planning for Payday Super.”

Where qualifying earnings fit in the Payday Super changes

Payday Super has two big moving parts for employers:

1. Timing – SG will move from a quarterly obligation to a per‑payrun requirement, with contributions needing to hit employees’ funds within 7 business days of payday.
2. Earnings base – the rules are being updated so that SG is calculated consistently on qualifying earnings rather than the current mix of concepts in legislation (salary and wages vs OTE).

For most day‑to‑day employers, the timing change gets the headlines. However, getting the earnings base right is just as important. If your payroll items are mis‑mapped, you can be calculating SG on the wrong amounts – even if you pay on time.

That’s where qualifying earnings comes in. Think of QE as the foundation your Payday Super calculations will sit on. Map it correctly now, and every future pay run becomes easier and less stressful.

What are qualifying earnings in plain English?

Qualifying earnings are the parts of an employee’s pay that count for super – mainly what they earn for their ordinary hours of work, plus related loadings, allowances, commissions, bonuses and paid leave that the ATO already treats as ordinary time earnings (OTE).

Treasury and ATO material released so far makes it clear that QE will be built around the existing idea of OTE. Until we see final legislation and detailed ATO guidance, the current OTE rules and examples are your best guide.

That means you don’t need to start from scratch. You can use the ATO’s existing “list of payments that are ordinary time earnings” as a practical checklist when you review your pay items for Payday Super.

Payments that are likely to be qualifying earnings

While we are still waiting for a formal QE schedule from the ATO, many common payments are very likely to be qualifying earnings because they are already treated as OTE today. For example:

• Base salary or wages for ordinary hours
• The regular pay employees receive for working their standard rostered hours.
• Over‑award payments for ordinary hours
• Extra amounts paid on top of minimum award or agreement rates for the ordinary hours of work.
• Shift loadings on ordinary hours
• Loadings paid for working nights, weekends or public holidays where those hours are part of the employee’s ordinary roster.
• Sales commissions and incentives
• Commissions and performance‑based payments that relate to work done in ordinary hours.
• Performance bonuses linked to normal work
• Bonuses that reward ongoing performance (for example, meeting annual targets) rather than compensating someone for losing their job.

• Allowances connected to ordinary duties, such as:
  • site allowance,
  • casual loading,
  • dirt, height, freezer or first‑aid allowances, and
  • other condition or skill‑based allowances that are paid as part of normal earnings.
• Paid leave during employment
• Paid annual leave, personal/carer’s leave and long service leave while the employee remains employed and is simply on leave.
• Piece‑rate payments
• Where employees are paid per unit produced for work done in their ordinary hours.
• Directors’ fees
• Amounts paid to company directors, which the ATO currently treats as OTE.

In many cases, salary sacrifice amounts will also feed into the QE calculation. If an amount would have been qualifying earnings but has been salary‑sacrificed into super or another benefit, it still needs to be considered when working out the minimum SG that must be provided.

Payments that are usually not qualifying earnings

On the flip side, some payments are typically not OTE today and are therefore unlikely to be treated as qualifying earnings under Payday Super. Common examples include:

• Overtime payments
• Pay for hours worked beyond ordinary hours – including where the whole shift is overtime.
• Payouts of unused leave on termination
• For example, when accrued annual leave or long service leave is cashed out when employment ends.
• Redundancy and certain other termination payments
• Genuine redundancy payments, severance amounts and some compensation for loss of employment.
• Genuine expense reimbursements
• Where the employee is simply being paid back for work‑related expenses they have actually incurred.
• Non‑cash and fringe benefits
• Cars, housing or other benefits provided instead of cash salary/wages are generally dealt with under the fringe benefits tax (FBT) rules, not through SG.

These items still need to be recorded and reported correctly for tax and payroll purposes, but they normally won’t form part of the qualifying earnings base for super.

Practical steps to get your payroll ready

The good news is that you don’t have to wait for 1 July 2026 to start your qualifying earnings review. A few practical steps now can save a lot of scrambling later:

1. Export your pay items from payroll

• Pull a list of all earnings types, allowances, bonuses and other pay items used in your system.

2. Compare each item to the ATO’s OTE list

• Use the ATO’s “list of payments that are ordinary time earnings” as a working guide. For each item, ask: “Is this currently treated as OTE?”

3. Tag items as QE yes / no / uncertain

• Mark each pay item as likely QE, not QE, or needs advice. This gives you a clear picture of where the grey areas are.

4. Update payroll settings so SG calculates on QE items automatically

• Work with your bookkeeper, BAS agent or payroll adviser to update your software settings so that SG is linked to the right earnings base ahead of Payday Super.

5. Flag tricky items for professional advice

• Complex allowances, one‑off bonuses or unusual payment arrangements are worth running past a qualified tax or superannuation adviser.

This review can be tackled gradually between now and the start of the 2026–27 income year. The aim is to enter the Payday Super era with pay items correctly mapped, so that once super is due every pay run, the calculations behind the scenes are already doing the right thing.

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Final thoughts and next steps

Qualifying earnings might sound like yet another piece of payroll jargon, but in reality it’s just a more formal label for something you’re already dealing with: which parts of your employees’ pay count for super.

By treating QE as “OTE with a Payday Super lens” and using the ATO’s existing examples as your guide, you can start mapping your pay items now, instead of waiting for the last minute.

If you’d like more plain‑English updates as Payday Super rolls out – including changes to concepts like qualifying earnings as the details are finalised – consider subscribing to the e‑BAS Accounts newsletter so you don’t miss key dates or practical tips.

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Information in this article is current as at March 2026 and is based on government design documents and existing ATO guidance about ordinary time earnings. It is general in nature and does not take into account your specific circumstances. It is not tax, superannuation or financial advice. Before acting, please check the latest ATO material and/or seek advice from a qualified professional about your situation.