ATO Interpretative Decision
ATO ID 2006/153
Superannuation
Superannuation Guarantee: payments of salary or wages to former employeesFOI status: may be released
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This Decision sets out our view for quarters ending before 1 July 2026. It does not address changes to the law after this time. Our view in relation to periods ending on or after 1 July 2026 is set out in Draft Law Companion Ruling LCR 2026/D3 - Payday Super: calculation and assessment of the superannuation guarantee charge.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you will need to ensure that the relevant provisions referred to in the decision have not been amended or repealed.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
Will the employer have an individual superannuation guarantee shortfall under subsection 19(1) of the Superannuation Guarantee (Administration) Act 1992 (SGAA) in respect of a payment of salary or wages to a former employee if the employer does not make sufficient superannuation contributions in respect of the payment by the cut off date for the quarter?
Decision
Yes. The employer will have an individual superannuation guarantee shortfall under subsection 19(1) of the SGAA in respect of a payment of salary or wages to a former employee if the employer does not make sufficient superannuation contributions in respect of the payment by the cut off date for the quarter.
Facts
The taxpayer ceased employment with the entity (the former employer) on 30 June 2005.
The entity paid the taxpayer a bonus payment in September 2005. The bonus is performance based and relates to the taxpayer's employment with the entity in the 2004-05 income year.
Reasons for Decision
An employer's individual superannuation guarantee shortfall for an employee for a quarter is the amount worked out using the formula in subsection 19(1) of the SGAA. The shortfall is calculated by reference to the total salary or wages paid by the employer to the employee for the quarter. An employer will have an individual superannuation guarantee shortfall for an employee under subsection 19(1) if the employer has not made sufficient superannuation contributions under either or both sections 22 and 23 of the SGAA to reduce the employer's charge percentage to nil in respect of the employee for the quarter.
For periods up until 1 January 2006, there were conflicting views as to whether the formula in subsection 19(1) of the SGAA applied to capture payments of salary or wages by an employer to a former employee. It was argued by some that subsection 19(1) had no operation in relation to former employees as the provision required the existence of a current employment relationship at the time of the payment. The Tax Office view is that, having regard to the context, scope and purpose of subsection 19(1), the better view of the law is that the provision did apply to payments of salary or wages by an employer to a former employee. Provided it is established that the payment arises from and has a clear link to an employer/employer relationship and has the character of salary or wages (as defined in the SGAA), subsection 19(1) will apply notwithstanding the fact that a current employment relationship does not exist at the time of the payment.
In the circumstances of this case, the taxpayer ceased work as an employee with the entity on 30 June 2005. The taxpayer received a performance based bonus payment from the entity in September 2005 which related to the taxpayer's employment with the entity in the 2004-05 income year. A bonus that relates to employment constitutes salary or wages for the purposes of the SGAA (paragraph 12 of Superannuation Guarantee Ruling SGR 94/5, which was later replaced by Superannuation Guarantee Ruling SGR 2009/2).[1] Because the bonus arises from and is clearly linked to the former employee's employment, the entity was therefore required to make sufficient superannuation contributions in respect of the payment to avoid having an individual superannuation guarantee shortfall under subsection 19(1) of the SGAA.
If the employer fails to make sufficient superannuation contributions in respect of the payment the employer will have an individual superannuation guarantee shortfall for the quarter in which the salary or wages was paid in.
For payments of salary or wages by an employer to a former employee on or after 1 January 2006, section 15B of the SGAA operates to put beyond doubt that the employer will have an individual superannuation guarantee shortfall in respect of the former employee under subsection 19(1) of the SGAA if they do not make sufficient contributions in respect of the payment by the cut off date for the quarter.
Amendment History
| Date of Amendment | Part | Comment |
|---|---|---|
| 1 July 2026 | Status of this decision | Updated to limit the application of the Practice Statement to periods ending before 1 July 2026 in light of the amendments made to the SGAA by the Treasury Laws Amendment (Payday Superannuation) Act 2025. |
| 1 July 2026 | Reasons for decision | Updated to reflect the replacement of SGR 94/5 with SGR 2009/2 and include a footnote noting that the Decision will not be further updated to address changes to advice products and the law after 30 June 2026 as it ceases to apply after that date. |
| 26 February 2010 | Reasons for decision | Add note to indicate that references to paragraph 12 of SGR 94/5 were replaced with paragraph 66 of SGR 2009/2 which was effective from 01 July 2009. |
From 1 July 2026, the Treasury Laws Amendment (Payday Superannuation) Act 2025 amends the SGAA to, among other things, replace the concept of salary and wages with qualifying earnings. SGR 2009/2 is also withdrawn from this time. As these changes take place after the period to which this Decision applies, they are not addressed in the Decision.
Year of income: Year ended 30 June 2005
Legislative References:
Superannuation Guarantee (Administration) Act 1992
section 15B
subsection 19(1)
section 22
section 23
The Act
Related Public Rulings (including Determinations)
Superannuation Guarantee Ruling SGR 94/5
Superannuation Guarantee Ruling SGR 2009/2
Keywords
Superannuation contributions for employees
Superannuation guarantee shortfalls
Date reviewed: 6 June 2026
ISSN: 1445-2782
| Date: | Version: | |
| 6 June 2006 | Original statement | |
| You are here | 1 July 2026 | Updated statement |