Director fees on superannuation: Do you need to pay super to company directors?

Superannuation is at the core of Australia’s retirement savings system. While most employers are required to make contributions for their employees, the rules become less straightforward when it comes to company directors.

The reality is that the entitlement to super contributions for a director isn’t always clear. It depends on the nature of their engagement and the type of payments they receive. And with the ATO keeping a close eye on superannuation compliance, the consequences of getting it wrong can be costly, from back payments and penalties to broader compliance issues.

That’s why understanding the obligations around director fees is so important. Whether you’re a business owner, a director yourself or someone managing payroll, it’s important you’re across your obligations. In this guide, we’ll walk you through everything you need to know about director fees.

What are directors’ fees?

Directors’ fees are specific payments made to board members for their role in governing the company. These fees compensate directors for the responsibilities, risks and time associated with serving on a board.

This includes attending board meetings, participating in sub-committees and providing high-level strategic oversight. Unlike traditional wages, these fees reflect the specific governance duties a director takes on rather than day-to-day operational labour.

What is the difference between a director’s salary and director fees?

It is easy to confuse a director’s salary with director fees, but the Australian Taxation Office (ATO) treats them differently.

A salary is paid to an executive, like a CEO or Managing Director, for their day-to-day operational work running the business. They’re an employee of the company and their compensation is tied to an employment contract.

On the other hand, director fees are separate compensations paid to board members (which can include both executive and non-executive directors) specifically for their governance duties. An executive director might receive both a standard salary for their daily role and separate director fees for their board responsibilities.

Superannuation obligations for directors’ fees

When managing payroll for growing Australian businesses, getting your head around super obligations is essential. The ATO has strict guidelines on what types of payments attract superannuation and director fees fall squarely into this category.

As an employer, you need to understand how these fees are classified so you can help manage your compliance effectively and avoid unexpected penalties. 

Ordinary Time Earnings (OTE) and directors’ fees

The amount of super you must pay is based on a person’s Ordinary Time Earnings (OTE). OTE is generally what your employees earn for their ordinary hours of work.Under ATO rules, directors’ fees are explicitly classified as OTE. This means that when you pay a director for their governance duties, that payment is treated the same as ordinary wages for superannuation purposes. You also need to make sure you’re meeting superannuation fund choice requirements when setting up these payments.

Does the Super Guarantee (SG) apply to director fees?

Yes, in most cases.

The ATO classifies director fees as OTE for the purposes of calculating superannuation guarantee obligations.

Because of this classification, the business must pay the standard Superannuation Guarantee (currently 12% as of the 2025-26 financial year) on these earnings. You cannot simply bypass the Super Guarantee because the person holds a director title.

There is one important threshold condition: SG only applies if the director is actually entitled to payment for their duties. Directors are not entitled to payment unless the company’s constitution specifically provides for it or shareholders have formally approved it. Unpaid or voluntary directors therefore do not attract SG obligations.

When are director fees exempt from superannuation?

While the general rule is that you must pay super on director fees, there are a few exceptions.

If the director fee is paid to an incorporated entity rather than the individual directly, the super rules change. For example, if a director provides their services through their own Pty Ltd consulting firm and the fees are paid to that company, your business is generally not obligated to pay super. However, this exemption only applies where the arrangement is genuine. Professional advice is recommended before relying on this exemption.

Additionally, if the remuneration is legally distributed as a company dividend instead of a fee for service, the Super Guarantee does not apply.

What if a director invoices the company?

This is a potential compliance issue that catches many businesses off guard. Often, a non-executive director will submit an invoice for their fees, complete with an ABN.

It is tempting to just pay this like a standard supplier invoice through your accounts payable system. Do not do this.

Even if they issue an invoice, the payment must be processed through your payroll system. You must withhold PAYG tax, include the 12% superannuation payment and report the entire transaction via Single Touch Payroll (STP). 

Note: this applies where the invoice is from the director personally. If the invoice is legitimately issued by the director’s own incorporated company, different rules may apply. 

How to calculate super on director fees

Calculating super on director fees is relatively straightforward. You simply apply the current 12% SG rate to the gross director fee amount.

However, you should be aware of the Maximum Contribution Base (MCB) cap. The ATO sets a quarterly limit on the earnings base for superannuation. If a director’s total earnings (salary plus director fees) exceed this quarterly limit, your company is not obligated to pay super on the excess amount.

For the 2025-26 financial year, the MCB cap is $62,500 per quarter. This means the maximum mandatory SG contribution an employer must pay is $7,500 per quarter ($62,500 X 12%).

Tracking this cap manually can be tedious, which is why a robust payroll system is essential for growing businesses.

How Payday Super affects director payments

A major legislative change is just around the corner. From 1 July 2026, Payday Super comes into effect. This means the old method of batching director super payments at the end of the quarter will fall under non-compliance from 1 July 2026. Quarterly payments remain compliant until 30 June 2026.

Under the new rules, superannuation on director fees must reach their account within 7 business days of being paid out. 

Under this reform, the law moves from OTE to Qualifying Earnings (QE) for super calculations. However, for most directors, the dollar amount remains the same as it includes OTE.If you pay a director monthly, their super must be paid monthly. This change will drastically increase the administrative burden for businesses relying on manual processes. To get ahead of the curve, read our comprehensive Payday Super Factsheet and discover how to prepare for Payday Super.

How Employment Hero simplifies director payroll and compliance

Managing director fees, calculating OTE, tracking the MCB cap and preparing for Payday Super shouldn’t require a degree in tax law. You need an Employment Operating System that takes the heavy lifting off your plate.

Employment Hero is designed to streamline this entire process. Our platform allows businesses to correctly categorise Director’s Fees, with a dedicated STP payment classification that reports to the ATO. You can also specify whether a pay category is superable using our Super Rate field, giving you control over how superannuation is applied.

More importantly, Employment Hero supports your compliance with the upcoming Payday Super changes, automatically aligning super payments with every pay run. And with the launch of HeroClear, a first-of-its-kind embedded super clearing solution, you can track super contributions in real-time directly within Employment Hero, making the transition to Payday Super completely seamless.

Ready to see for yourself? Get in touch with one of our business specialists today.

Disclaimer: The information in this guide is current as at 4 March 2026, and has been prepared by Employment Hero Pty Ltd (ABN 11 160 047 709) and its related bodies corporate (Employment Hero). The views expressed in this guide are general information only, are provided in good faith to assist employers and their employees, and should not be relied on as professional advice. The Information is based on data supplied by third parties. While such data is believed to be accurate, it has not been independently verified and no warranties are given that it is complete, accurate, up to date or fit for the purpose for which it is required. Employment Hero does not accept responsibility for any inaccuracy in such data and is not liable for any loss or damages arising either directly or indirectly as a result of reliance on, use of or inability to use any information provided in this guide. You should undertake your own research and to seek professional advice before making any decisions or relying on the information in this guide.