Date of advice: 28 March 2024

Edited version of administratively binding advice

Advice

Subject: Ordinary time earnings

Question

Is a payment made to an employee for surrendering their designated rooms on site accommodation considered ordinary time earnings (OTE) as defined under subsection 6(1) of the Superannuation Guarantee (Administration) Act 1992 (SGAA)?

Answer

Yes.

This advice applies for the following period:

Year Ending 30 June 20YY

The scheme commenced on:

01 July 20YY

Relevant facts and circumstances

Your advice is on the facts stated in the description of the scheme that is set out below. If your circumstances are different from these facts, this advice has no effect and you cannot rely on it. The fact sheet has more information about relying on ATO advice.

The employer is situated in remote areas.

Given the remoteness of the site locations, it is impractical and unreasonable for many employees to travel from home to work each day.

The employer provides temporary accommodation to employees when they work on site.

The employees can keep their belongings in the assigned accommodation even when they are off work.

These rooms remained vacant until employees return to work.

Due to shortage of accommodation, the employer redesigned the accommodation system.

The employees used their accommodation only while they were working their shift on site.

They collected their belongings with them when they finished their shift.

To encourage participation, the employer made a payment to employees who agreed to give up their dedicated rooms.

Employees' earnings are calculated based on the time that the shift starts on site to the time that the shift ends.

Employees do not get paid when they are not working on shift.

Employees do not receive earnings when they stay in their accommodation before and after their shift.

Relevant legislative provisions

Superannuation Guarantee (Administration) Act 1992 subsection 6(1)

We followed these ATO View documents

Superannuation Guarantee Ruling SGR 2009/2 - Superannuation guarantee: meaning of the terms 'ordinary time earnings' and 'salary or wages'

Reasons for decision

Ordinary time earnings

Superannuation Guarantee Ruling SGR 2009/2 Superannuation guarantee: meaning of the terms 'ordinary time earnings' and 'salary or wages' (SGR 2009/2) explains the meaning of OTE.

OTE is defined under paragraph 10 of SGR 2009/2. OTE, in relation to an employee, is defined in subsection 6(1) of the SGAA as:

  (a) the total of:

    (i) earnings in respect of ordinary hours of work other than earnings consisting of a lump sum payment of any of the following kinds made to the employee on the termination of his or her employment:

(A)          a payment in lieu of unused sick leave;

(B)          an unused annual leave payment, or unused long service leave payment, within the meaning of the Income Tax Assessment Act 1997; and

   (ii) earnings consisting of over-award payments, shift-loading or commission; or

  (b)if the total ascertained in accordance with paragraph (a) would be greater than the maximum contribution base for the quarter - the maximum contribution base.

OTE is usually the amount an employee earns for their ordinary hours of work. It includes commissions, shift-loadings and some allowances, but does not include overtime payments.

Paragraph 12 of SGR 2009/2 provides the meaning of 'earnings', and paragraphs 13 to 18 of SGR 2009/2 outline the meaning of 'ordinary hours of work'.

Meaning of 'earnings'

12. An employee's 'earnings', for the purpose of the definition of OTE, is the remuneration paid to the employee as a reward for the employee's services. The practical effect for superannuation guarantee purposes is that the expression 'earnings' means 'salary or wages'.

Meaning of 'ordinary hours of work'

13. An employee's 'ordinary hours of work' are the hours specified as his or her ordinary hours of work under the relevant award or agreement, or under the combination of such documents, that governs the employee's conditions of employment.

14. The document need not use the exact expression 'ordinary hours of work', but it needs to draw a genuine distinction, for the purposes of the award or agreement, between ordinary hours and other hours. In particular, it would be expected that the other hours are remunerated at a higher rate (typically described as overtime) than the ordinary hours, or otherwise identifiable as a separate component of the total pay in respect of non-ordinary hours.

15. Any hours worked in excess of, or outside the span (if any) of, those specified ordinary hours of work are not part of the employee's 'ordinary hours of work'.

16. If the ordinary hours of work are not specified in a relevant award or agreement, the 'ordinary hours of work' are the normal, regular, usual or customary hours worked by the employee, as determined in all the circumstances of the case. This is not necessarily the minimum or maximum number of hours worked or required to be worked.

17. In such cases, it may often not be possible or practicable to determine the normal, regular, usual or customary hours of an employee's work. If so, the actual hours worked should be taken to be the ordinary hours of work.

18. 'Ordinary hours of work' are not necessarily limited to hours to be worked between 9am and 5pm, Monday to Friday. They may (depending on the provision in the relevant award or agreement, if any) include hours to be worked at other times, including at night, on weekends or on public holidays.

Paragraph 25 of SGR 2009/2 explains that all amounts of earnings in respect of employment are in respect of the employee's ordinary hours of work unless they are remuneration for working overtime hours, or are otherwise referable only to overtime or to other hours that are not ordinary hours of work. There is no such thing as earnings that are merely in respect of employment generally and are not OTE because they are not in respect of any particular hours of work.

In this case, the ordinary hours of work each shift are the hours employees start and finish working on site. The amount paid to employees is not remuneration for working overtime hours or working other hours that are not ordinary hours.

Employees generally require accommodation when working for the employer in their remote site. The payment is made to employees who give up their dedicated rooms. This payment is not a personal gift to employees. It is seen as an inconvenience payment, it is not referable to earnings for working in non-ordinary hours. As there is no such thing as earnings that are merely in respect of employment generally and are not OTE. Therefore, the payment is earnings in respect of employment, and is in respect of employees' ordinary hours of work and an OTE.