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Edited version of private advice

Authorisation Number: 1051805886314

Date of advice: 23 March 2021


Subject: Superannuation guarantee - ordinary time earnings

Question 1

Which of the various allowances and payments you pay your employees are considered ordinary time earnings (OTE)?


Allowances that are considered expense allowances are not considered OTE, the remainder of the allowances are considered OTE. A payment that is paid to a worker on separation of duties is not considered reward for services, therefore is not considered OTE.

Refer to 'Reasons for decision'

This advice applies for the following periods:

Year ended 30 June 20XX

Year ended 30 June 20XX

Year ended 30 June 20XX

Year ended 30 June 20XX

The arrangement commences on:

1 July 20XX

Relevant facts and circumstances

You pay a series of allowances to your workers. Some of these allowances are paid with a reasonable expectation that the employee will fully expend the money in the course of providing services. You pay your workers a payment when they cease to be your employee for any reason other than breach of code of conduct.

Relevant legislative provisions

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

Reasons for decision

Detailed reasoning

All employers are required to provide a minimum level of superannuation support for their eligible employees by the superannuation guarantee (SG) period due date. From 1 July 2008, employers must use OTE as the earning base to calculate the minimum SG contributions required for employees.

Ordinary time earnings

OTE, in relation to an employee, is defined in subsection 6(1) of the SGAA and is the lesser of:

the total of the employee's earnings in respect of ordinary hours of work and earnings consisting of over award payments, shift loading or commission, but does not include lump sum payments made on termination of employment in lieu of unused sick leave, unused annual leave and unused long service leave; or

the maximum contribution base for the quarter - the maximum contribution base, which is the maximum limit on the amount of superannuation support that an employer is expected to provide for the benefit of an employee. The maximum contribution base for the 2013-14 year of income is $48,040 per quarter. This amount is indexed annually according to the indexation factor.

Superannuation Guarantee Ruling SGR 2009/2 Superannuation guarantee: meaning of the terms 'ordinary time earnings' and 'salary or wages' (SGR 2009/2) sets out the Commissioner's views on the meaning of OTE.

Paragraphs 13 to 15 of SGR 2009/2 address the meaning of 'ordinary hours of work' and state:

Meaning of 'ordinary hours of work'

13.          An employee's 'ordinary hours of work' are the hours specified in his or her ordinary hours of work under the relevant award or agreement, or under a 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'.


Paragraph 27 of SGR 2009/2 provides that additional payments, such as allowances and loading payments, made to employees to recognise or compensate employees for certain conditions relating to their employment are OTE except to the extent that they relate solely to hours of work other than ordinary hours of work.

Paragraph 65 of SGR 2009/2 states that for the purposes of the SGAA, all allowances, except expense allowances and allowances that are fringe benefits under the FBTAA, received by an employee, are included in their 'salary or wages'.

Paragraphs 72 and 73 of SGR 2009/2 address expense allowances and reimbursements and state:

72.          Expense allowances, that is, those allowances paid to an employee with a reasonable expectation that the employee will fully expend the money in the course of providing services, are not 'salary or wages'.

73.          A reimbursement that compensates an employee for an expense they have incurred on behalf of the employer is also not 'salary or wages'.

Therefore, in your case, the allowances you have described will be included in an employee's salary and wages unless it is an expense allowance or reimbursement payment.

Where the allowance is paid with the reasonable expectation that the employee will fully expend the money in the course of providing services, are not 'salary or wages' and therefore not OTE.

However, where an allowance is paid regardless of whether the employee is reasonably expected to expend it, or it is paid more as compensation for a condition of employment it is 'salary or wages' and also OTE.

Redundancy Payments

Paragraph 74 of the SGR 2009/2 states:

74.          Redundancy payments made on termination of employment are not a reward for services rendered by an employee, even if part of the payment is calculated by reference to the employee's period of service with the employer. They are payments to compensate the employee for the loss of their job; not a reward for their services.

In your case the payment of separation of employment is paid as a consequence of ceasing to be an employee and would be treated similar to redundancy payments and not be considered OTE.