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Edited version of private advice

Authorisation Number: 1051983009655

Date of advice: 20 June 2022

Ruling

Subject: Superannuation contributions

Question

Will superannuation contributions (SG) made by both former employers and new employer be considered as provided 'on behalf of' each entity?

Answer

Yes.

This ruling applies for the following period:

Year ended 30 June 20XX

Year ended 30 June 20XX

Year ended 30 June 20XX

Year ended 30 June 20XX

Year ended 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

Entity A was established with the intent that this entity would become the single employment entity for all employees in the Group.

Employees were transferred from Entity B and Entity C to Entity A in 4 tranches to limit disruption to the business.

The employees continued to provide services to the former employer following the transfer

The same contractual terms were applicable to the transferred employees and all previous accrued benefits were carried over, such as accrued annual leave.

Fixed remuneration remained the same for transferred employees.

Locations, duties and reporting of employment all remained the same before and after the transfer.

No new TFN declarations and superannuation choice forms were required as the employees waived the need for these as a as part of the transfer.

No new employment contracts were issued to the transferring employees, the transfer letter received by such employees outlined their employment contracts would remain in place with only the entity name of the employer being updated to the new employing entity.

The transferred employees were moved to the new entity's payroll system, but this system is consistent across all entities in the group of entities and the payroll system shows the transfer as a continuation of the same employment.

Calculation of the SG for the remainder of the quarter was undertaken, with the intention being to pay the minimum SG capped at the maximum contribution base. This was reflected in the employment contracts.

The entities attempted to limit the SG to the MCB by applying a single MCB to the transferring employees for the entire quarter.

For those employees that exceeded the MCB, the quarterly cap was divided in to three to calculate the equivalent cap amount per month. The new and former employers would pay the SG for the respective months the employee was employed by them.

The possibility arose that both the former and new employers had not satisfied their SG obligations for the transferring employees for the quarter in which they transferred. The combined approach between the entities means that the SG contributions had been paid up to the quarterly MCB, but neither employer had separately made these contributions in full.

Relevant legislative provisions

Superannuation Guarantee (Administration) Act 1992 ('SGAA')

Reasons for decision

Question

Will the superannuation contributions (SG) made by both former employers and new employer be considered as provided 'on behalf of' each entity?

Summary

The transferral of employees from Entity B and Entity C to Entity A was a co-ordinated process that required minimal change with the exception of the employee's legal employing entity. This 'co-ordinated approach', including the payroll team's splitting of MCB quarters into three months across entities, makes it evidential that the former employers and new employer were acting 'in the interest of' and 'in aid of' each other by collectively ensuring the SG is sufficiently paid. As such, the parties had an intention to cover each other's superannuation obligations and therefore each contribution is on behalf of each entity.

Detailed reasoning

Subsection 6(2) of the SGAA states:

For the purposes of this Act, a reference to a contribution made by an employer for the benefit of an employee includes a reference to a contribution made on behalf of the employer.

SGD 2017/1 uses the ordinary and natural meaning of 'on behalf of' as it is not defined in the SGAA. The Macquarie Dictionary (Sixth Edition, 2013) defines 'on behalf of' as 'in the interest of; in aid of'. As can be derived from the above summary, Entity B and Entity C worked closely Entity A to ensure the SG was met without exceeding the MCB, there was a complete intention for the entities to work in the interest and aid of each other.

Most specifically, the system for attempting to limit the SG to the MCB by applying a single MCB to the transferring employees for the entire quarter indicated the new and former employers working in aid of each other. For those employees exceeding the MCB, they divided the quarterly cap in to three to calculate the equivalent cap amount per month with the new and former employers paying the SG for the respective months the employee was employed by them. The inclusive and co-operative nature of not only this system, but many other systems that were implemented in the transfer of employees from Entity B and Entity C to Entity A indicate somewhat of a continuation of employment, and that the entities involved were aiding each other extensively. Therefore, the SG contributions that came about from a result of this co-operative approach between entities is more than sufficient in determining that the superannuation contributions made by both the former employers and new employer were provided as 'on behalf of' each entity.