Salary Sacrifice Setup: Super From Non-Qualifying Earnings

If an employee salary sacrifices some non-qualifying earnings income (e.g. paid parental leave or overtime) to superannuation contributions, here's how to set up their income and salary sacrifice pay items. In this case, employer super guarantee is not calculated on the salary sacrificed contribution.

Ordinary time earnings income pay item setup

On the Pay Item Liabilities form (MPPP1025):

• Select both of the Liable for Superannuation (SG) and Liable for Qualifying Earnings (QE) checkboxes.
• Set the ATO category to Gross Payments.

Other income pay item setup

On the Pay Item Liabilities form (MPPP1025):

• Do not select either of the Liable for Superannuation (SG) and Liable for Qualifying Earnings (QE) checkboxes.
• Set the ATO category to the relevant income type, e.g. paid parental leave or overtime.

Salary sacrifice pay item setup

On the Pay Items form (MPPP2210):

• Set the Type to Employee Super.
• Set the Taxation field to Pre-tax deduction : Standard PAYG.
• On the Additional Info tab, set the Category to SS Salary Sacrifice.

On the Pay Item Liabilities form (MPPP1025):

• Do not select either of the Liable for Superannuation (SG) and Liable for Qualifying Earnings (QE) checkboxes.
  Note:

  You don't need to select the liabilities because the employee's ordinary income pay item already include their salary sacrifice portion. Since the salary sacrifice pay item is a pre-tax deduction, setting it as liable would reduce the superannuation guarantee calculation and understate your super obligation.
• Set the ATO category to Salary sacrifice superannuation + RESC.

Example

Let's say Sarah normally earns $3,000 each pay period. In one busy fortnight, she also works additional hours and earns $1,000 in overtime. Sarah has a salary sacrifice arrangement and decides to contribute $200 of her overtime earnings directly to her super fund.

So, Sarah's total earnings for the pay period are $4,000. Because $200 is being salary sacrificed to super, her employer calculcates PAYG withholding on $3,800 rather than the full $4,000.

However, overtime earnings are not considered qualifying earnings for super guarantee. And because Sarah sacrificed $200 from her overtime earnings, this salary sacrificed contribution is also not considered qualifying earnings. So, her employee only calculates super guarantee on the $3,000 she normally earns each pay period. At a rate of 12% (the minimum compulsory rate for 2026–27), this results in an employer super contribution of $360.

By the end of the pay period, Sarah's super fund receives a total of $560:

• $360 in employer super guarantee.

• $200 in employee salary sacrifice contributions.

Here are the amounts that would be reported to the ATO as part of Single Touch Payroll (STP):