From 1 July 2026, the earnings base used to calculate super contributions changes under Australia's new Payday Super rules. Ordinary Time Earnings (OTE) — the long-standing measure used to calculate the 12% superannuation guarantee — is replaced by a new concept: Qualifying Earnings (QE).
For most employees, the practical difference between QE and OTE is small. But understanding exactly what is included and excluded matters — especially for employers managing casual staff, commission-based workers, or complex pay structures. Getting the earnings base wrong means either underpaying super (and facing an ATO SGC charge) or overpaying (a cash flow drain that compounds with every pay run under the new per-payrun rules).
This guide breaks down qualifying earnings by payment type and employment category, with practical tables you can use alongside our Payday Super calculator to verify your calculations before 1 July 2026.
Quick summary
- Qualifying Earnings (QE) replaces OTE as the super calculation base from 1 July 2026
- For most employees, QE and OTE produce similar results — the practical difference is minor
- Casual loading (25%) is included in qualifying earnings
- Overtime pay is generally excluded from qualifying earnings
What are qualifying earnings?
Qualifying Earnings (QE) is the new earnings measure introduced with Payday Super to determine which payments attract the 12% superannuation guarantee. From 1 July 2026, employers calculate super by applying 12% to an employee's QE for each pay cycle — not their total gross pay.
The ATO defines qualifying earnings as the sum of ordinary-hours earnings — including base wages or salary, casual loading, shift loadings on ordinary hours, and most regular allowances — but excluding overtime pay, expense reimbursements, and certain termination payments. For the authoritative definition, see the ATO's Payday Super guidance.
QE replaces OTE as the calculation base because it is designed to align more closely with the way modern pay structures work under Single Touch Payroll Phase 2 — where each payment type is separately reported and classified. Use the Payday Super calculator to model the impact of QE on your super obligations before the deadline.
How qualifying earnings compare to ordinary time earnings
For most employees in straightforward pay arrangements, there is little difference between what QE and ordinary time earnings (OTE) produce. Both are based on earnings for ordinary hours of work. The key differences appear at the margins — certain allowances, leave loading, and payment structures where OTE and QE diverge slightly in their definitions.
| Payment type | OTE (pre-2026) | Qualifying Earnings (from July 2026) |
|---|---|---|
| Base wages / salary | Included | Included |
| Casual loading (25%) | Included | Included |
| Shift loadings (ordinary hours) | Included | Included |
| Overtime pay | Excluded (where identifiable) | Excluded (generally) |
| Leave loading | Generally included | Generally included |
| Regular allowances | Generally included | Generally included |
| Expense reimbursements | Excluded | Excluded |
| Termination payments | Generally excluded | Generally excluded |
The practical message for most employers: your super calculation process will not change dramatically. The biggest transition task is updating your payroll system to use QE as the calculation base rather than OTE — which your payroll provider should handle via a software update before 1 July 2026. The more important focus is ensuring the underlying pay component classifications are correct.
What counts as qualifying earnings
The following payment types are generally included in qualifying earnings for the purpose of calculating the 12% superannuation guarantee under Payday Super.
Included in qualifying earnings
- Regular wages and salary — base pay for ordinary hours of work, whether hourly, weekly, or annual salary
- Casual loading (25%) — the loading paid in lieu of leave entitlements is included in QE in full
- Shift loadings on ordinary hours — evening, afternoon, and weekend penalty rates applied to ordinary hours (not overtime)
- Commissions (ordinary hours component) — commission payments attributable to ordinary hours of work
- Most regular allowances — tool allowances, meal allowances, and other regular award-based payments
- Leave loading — generally included, particularly where it represents a regular component of pay
- Public holiday pay (ordinary hours) — pay for working ordinary hours on a public holiday, including the applicable penalty rate
For the definitive list of inclusions, refer to the ATO's Payday Super qualifying earnings guidance. When there is doubt about a specific payment type, the ATO's published rulings and private advice mechanisms are the authoritative route for employer certainty.
What is excluded from qualifying earnings
Not all payments an employee receives are part of qualifying earnings. The exclusions broadly mirror the OTE exclusions that employers are already familiar with.
Excluded from qualifying earnings
- Overtime pay — pay for hours worked beyond ordinary hours is generally excluded from QE
- Overtime penalty rates — even where penalty rates apply to overtime hours, those amounts are excluded
- Workers' compensation payments (while absent) — payments made while an employee is on workers' compensation leave are excluded
- Genuine expense reimbursements — car allowances paid to reimburse actual expenses, meal reimbursements, and similar payments are excluded
- Most termination payments — redundancy pay, payment in lieu of notice, and similar termination-related amounts are excluded
- Annual leave payments on termination — leave paid out on termination rather than taken as leave is generally excluded
Not sure if a payment type is included? If you are uncertain whether a specific payment type is part of qualifying earnings — particularly for complex allowance structures, commission arrangements, or irregular payments — check the ATO's Payday Super guidance or seek advice from a qualified payroll professional. The ATO also has a private advice process for complex cases.
The overtime exclusion in particular requires careful payroll configuration. If your system cannot clearly distinguish between ordinary hours and overtime hours — for example, if your rostering system does not mark shifts as overtime — all hours may default to QE-included, overstating the super base. A clean pipeline from rostering to payroll is essential.
Qualifying earnings by employment type
The practical application of qualifying earnings varies depending on how an employee is engaged. The table below summarises QE for the four most common employment types in Australian businesses.
| Employment type | What forms qualifying earnings | Key notes |
|---|---|---|
| Full-time | Base salary + regular allowances on ordinary hours | Most straightforward; overtime must be clearly distinguished from ordinary hours |
| Part-time | Pro-rata wages for contracted hours + applicable allowances | Hours beyond contracted ordinary hours may be overtime — check the applicable award |
| Casual | Wages + 25% casual loading (all on ordinary hours) + shift loadings | No $450 threshold; super calculated on every pay cycle regardless of hours worked |
| Commission-based | Base pay + commission attributable to ordinary hours of work | Commission attribution can be complex — verify treatment with payroll adviser if uncertain |
Employers managing a mix of casual and permanent staff — common in hospitality, retail, aged care, and events — need to ensure their payroll system applies the correct QE rules to each employee type independently. A single misconfigured pay component that applies across all staff types can create widespread underpayment or overpayment of super simultaneously.
Special considerations for casual workers
Casual employees have some unique characteristics that make qualifying earnings calculations both simpler and more variable than for permanent staff. For a full guide to how Payday Super affects casual workers specifically, see our guide on Payday Super for casual workers.
Casual loading is included
The 25% casual loading paid in lieu of leave entitlements is part of qualifying earnings. Super is calculated on the full casual rate — base hourly rate plus the 25% loading — for all ordinary hours worked.
No minimum earnings threshold
Since 1 July 2022, the $450 monthly earnings threshold was removed. Casual employees accrue super on every dollar of qualifying earnings regardless of how few hours they work in a pay cycle.
Super paid per pay cycle
Under Payday Super, casual workers receive super with every pay run — weekly or fortnightly in most cases. There is no quarterly accumulation. Even small amounts of super must be remitted within 7 business days of each payday.
Variable QE each cycle
Because casual workers' hours and shift types vary each cycle, their qualifying earnings — and therefore their super obligation — changes with every pay run. Payroll software must recalculate QE fresh each cycle, not carry forward a fixed amount.
How to calculate QE for a casual employee
For a casual employee working ordinary hours, qualifying earnings are calculated as follows:
Qualifying earnings formula for casual employees
QE = (base hourly rate × 1.25) × ordinary hours worked
For shifts with applicable loadings (evening, weekend):
QE = (base hourly rate × 1.25 × loading multiplier) × ordinary hours worked
Super is then calculated as 12% of QE for that pay cycle. Use the Payday Super calculator to verify your per-cycle super obligations for casual staff with variable hours.
For businesses with large casual workforces — hospitality venues, retail chains, event companies — the per-cycle nature of Payday Super combined with variable QE means payroll must be processed accurately every single time. A roster that classifies shift types correctly (ordinary hours vs overtime, weekday vs weekend) is the foundation for accurate QE calculation.
Related RosterElf features
Calculate super correctly from 1 July 2026
RosterElf connects your roster to payroll so shift types are correctly classified, qualifying earnings are calculated accurately, and super is right on every pay run.
- Automatic shift type classification (ordinary hours vs overtime)
- Casual loading and penalty rates applied at the roster level
- Direct export to Xero and MYOB with correct pay component coding
Frequently asked questions
Are qualifying earnings the same as ordinary time earnings?
Not exactly. Qualifying Earnings (QE) replaces Ordinary Time Earnings (OTE) as the super calculation base under Payday Super from 1 July 2026. For most employees, QE and OTE produce similar results, but QE has a slightly broader definition in some cases.
Does overtime count as qualifying earnings?
Generally no. Overtime pay is excluded from qualifying earnings in most cases. Only pay for ordinary hours of work — including applicable loadings on those ordinary hours — forms part of qualifying earnings for super calculation purposes.
Is casual loading included in qualifying earnings?
Yes. The 25% casual loading paid to casual employees is included in qualifying earnings. Super is calculated on the full casual rate (base + loading) for the ordinary hours worked.
How do I calculate super for a casual employee under payday Super?
Calculate 12% of the employee's qualifying earnings for that pay cycle. For a casual employee, qualifying earnings = (hourly rate × 1.25) × hours worked on ordinary time. Use the Payday Super calculator for estimates.
Do commissions count as qualifying earnings?
Commissions paid for ordinary hours of work generally count as qualifying earnings. However, the treatment of commission structures can be complex. Always verify with the ATO or a payroll professional if your commission arrangements are unusual.
Where can I find definitive guidance on qualifying earnings?
The ATO's Payday Super guidance is the authoritative source for qualifying earnings definitions. The Fair Work Ombudsman also provides employer guidance on the reform.
Disclaimer: This article provides general guidance only and does not constitute legal, tax, or financial advice. Qualifying earnings rules for Payday Super are subject to final ATO guidance. Always verify with the ATO or a qualified payroll professional before making decisions.
