ATO Interpretative Decision
ATO ID 2001/151 (Withdrawn)
Superannuation
Notional earnings base for the superannuation guarantee chargeFOI status: may be released
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This ATOID does not accurately reflect the ATO view due to legislative changes contained in Taxation Laws Amendment (Superannuation) Act (No. 2) 2002 (51 of 2002)This document incorporates revisions made since original publication. View its history and amending notices, if applicable.
This ATOID provides you with the following level of protection:
If you reasonably apply this decision in good faith to your own circumstances (which are not materially different from those described in the decision), and the decision is later found to be incorrect you will not be liable to pay any penalty or interest. However, you will be required to pay any underpaid tax (or repay any over-claimed credit, grant or benefit), provided the time limits under the law allow it. If you do intend to apply this decision to your own circumstances, you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed. You may wish to obtain further advice from the Tax Office or from a professional adviser.
Issue
Should the employer include long service leave payments that are paid to employees in the construction industry by a statutory board, which is set up under State legislation, in each employee's notional earnings base for the purposes of the Superannuation Guarantee (Administration) Act 1992 (SGAA)?
Decision
No, the employer should not include long service leave payments made by the statutory board in each employee's earnings base for the purposes of the SGAA.
Facts
Due to the nature of the work in the construction industry, workers often have difficulty accumulating long service leave entitlements. Accordingly, each State of Australia established a statutory board to administer a fund that enables construction workers to carry their entitlements from one employer to another and provides long service leave payments to workers in the construction industry. However, the statutory boards do not actually employ the construction workers.
Long service leave entitlements are paid in a lump sum by the statutory boards. The long service leave payments made by the boards are funded from various sources, including levies paid by employers in the construction industry. The long service leave entitlements are administered by the statutory boards and not by the employers in the construction industry.
In this case, the amount of superannuation contributions made by the employer for each employee is governed by the relevant industrial award for the construction industry. For the purposes of determining the employer's superannuation contributions, the applicable award specifies an earnings base for each employee that is based on 'ordinary time earnings', which the award defines as being earnings based on a specified average weekly wage. The definition of 'ordinary time earnings' under the award does not include long service leave entitlements.
For the purposes of calculating the superannuation contributions, the award adheres to the charge percentage required by section 20 (SGAA).
Reasons For Decision
Under section 16 (SGAA), the employer is required to pay a superannuation guarantee charge where the employer has a superannuation guarantee shortfall. Section 19 (SGAA) stipulates that the superannuation guarantee shortfall is calculated by multiplying the total salary or wages paid by the employer to the employee by a charge percentage, which is ascertained from sections 20 and 21 (SGAA).
The charge percentage may be reduced to zero under section 22 or 23 (SGAA), thereby reducing the employer's superannuation guarantee shortfall to nil, where the employer makes superannuation contributions that are equal to the amount given by the charge percentage multiplied by the employee's 'notional earnings base'.
In this case, the construction worker's employer makes superannuation contributions on behalf of the construction worker at the rate required by section 20 (SGAA) multiplied by a notional earnings base, which is specified in the award: see paragraphs 4 and 5 of Superannuation Guarantee Ruling SGR 94/1. Given the fact that the earnings base specified in the award does not include long service leave payments made by the statutory board, the employer does not have to include the long service leave payments in each employee's notional earnings base when calculating whether the employer has met its superannuation contribution obligations.
Date of decision: 14 April 2000
Legislative References:
Superannuation Guarantee (Administration) Act 1992
section 5
section 13
section 14
section 16
section 19
section 20
section 22
section 23
Superannuation Guarantee Ruling SGR 94/1
Keywords
Superannuation, retirement and employment termination
Superannuation guarantee scheme
Superannuation guarantee charge
ISSN: 1445-2782
| Date: | Version: | |
| 14 April 2000 | Original statement | |
| You are here | 17 March 2006 | Archived |