Edited version of administratively binding advice

Authorisation Number: 1052481306689

Date of advice: 5 March 2026

Advice

Subject: Superannuation Guarantee - fare and travel allowance forming part of OTE

Question

Does the Fare and Travel Pattern allowance (FTPA - the allowance) paid by the Principal to eligible employees pursuant to the award constitute part of ordinary time earnings (OTE) as defined in subsection 6(1) of the Superannuation Guarantee (Administration) Act 1992 (SGAA)?

Answer

Yes

This advice applies for the following periods:

Period ending 30 June 20XX

Period ending 30 June 20XX

Period ending 30 June 20XX

Period ending 30 June 20XX

Period ending 30 June 20XX

The scheme commenced on:

1 July 20XX

Relevant facts and circumstances

Eligible employees are covered by the Award and receive the allowance as per the eligibility criteria established under the Award.

An employee is only eligible to be paid the allowance when they start and finish work at a site. The allowance is only paid under specific circumstances and considered by the Principal to be a conditional payment.

Relevant legislative provisions

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

Reasons for decision

Summary

The FTPA is not considered to be an allowance that is intended to be fully expended by the employee when providing services to the employer.

Detailed reasoning

The SGAA places a requirement on all employers to provide a minimum level of superannuation support for their eligible employees by the quarterly due date or pay the superannuation guarantee charge. The minimum level of support is calculated by multiplying the charge percentage by each employee's earnings base.

From 1 July 2008, an employer must use OTE as defined in subsection 6(1) of the SGAA as the earnings base to calculate the minimum superannuation contributions for their employees. This ensures that all employees are treated the same for superannuation purposes.

Definition of ordinary time earnings

Subsection 6(1) of the SGAA defines OTE in relation to an employee to mean:

(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;

(C)                (Repealed by No 15 of 2007)

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

(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.

SGR 2009/2 provides that a payment that is OTE will be part of salary and wages but not all salary and wages payments will be OTE.[1]

In the context of 'earnings in respect of ordinary hours of work', the word 'earnings' means the renumeration paid to an employee as a reward for the employee's services and for the purposes of the superannuation guarantee, the expression 'earnings' has the practical effect to mean salary or wages.[2] The ordinary meaning of salary or wages is renumeration paid to employees for their service as employees.

In particular, the ruling states at paragraphs 25 and 26:

25. 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.

26. An award or agreement may itself have a definition of 'ordinary time earnings' that purports to apply for superannuation purposes. However, the central question posed by the definition of OTE in the SGAA is what amounts are 'earnings in respect of ordinary hours of work'. This could in some cases be a different amount from any purported amount of 'OTE' in the award or agreement. As mentioned in paragraph 13 of this Ruling, the Commissioner accepts that 'ordinary hours of work' are as determined by the relevant award or agreement, but that does not imply that OTE itself is necessarily as determined by the award or agreement.

The context and purpose with which the terms appear are identified at paragraphs 225 and 226:

225. 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.

226. The Commissioner does not consider that the services or attendance of an employee specifically during certain hours of work is necessary for the earnings to be 'in respect of ordinary hours' and therefore OTE. The Commissioner's view is that the expression 'in respect of ordinary hours of work' was intended to ensure that overtime payments, and cognate amounts, were excluded from the earnings base. It was not intended to exclude amounts paid at a worker's ordinary time rate solely on the ground that they were not earned as a direct result of actually working particular hours in ordinary time.

Further at paragraph 228 of the SGR 2009/2, the Commissioner accepts that payments that are not salary and wages will not be OTE, for example an allowance that is intended to be entirely expended, but that otherwise a payment that is in respect of employment must be either OTE or a direct payment for overtime hours or otherwise solely referrable to hours that are not ordinary hours of work.

Accordingly, in line with the above, all amounts of earnings in respect of employment should be considered to be in respect of the employee's ordinary hours of work unless these are remuneration for overtime or other hours that are not ordinary hours of work.

Allowances

An allowance is a payment of a definite predetermined amount to cover an estimated expense. Generally, it is paid regardless of whether the employee incurs the expected expense, and the employee has the discretion whether or not to expend the allowance.

Paragraph 27 of SGR 2009/2 relates to certain specific kinds of payments that are OTE. This states:

Many employees receive various additional payments that are described as allowances that are paid to employees to recognise or compensate for certain conditions relating to their employment. Examples:

•                a 'site allowance' paid fortnightly at a flat rate in acknowledgement of the displacement an employee undergoes when a job requires him or her to work in a remote location;

•                a 'casual loading' of 20% of the basic ordinary time rate of pay paid to a casual worker in lieu of any fixed, regular minimum hours of work and of paid leave entitlements;

•                a 'dirt allowance' paid as a flat rate in acknowledgement of the conditions in which the work is undertaken; and

•                a 'freezer allowance' paid at the rate of an extra $2.50 per hour to employees, such as some supermarket employees, who perform most of their duties in cold storage facilities.

These kinds of payments are OTE except to the extent that they:

•                are not 'salary or wages', for example if they are payments of a predetermined amount to offset or reimburse particular expenses; or

•                relate solely to hours of work other than ordinary hours of work.

Paragraph 65 of SGR 2009/2 relates to certain payments that are 'salary or wages'. This states:

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 'salary or wages'.

Paragraph 72 of SGR 2009/2 relates to expense allowances and reimbursements and states:

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'.

Paragraphs 259 to 266 of SGR 2009/2 also relate to allowances and reimbursements. These paragraphs state:

259. Section 11 ("Interpretation - Salary or wages" - added) does not expressly include in its definition of 'salary or wages' the term 'allowance'. The Commissioner however interprets the expression as used in the SGAA context as extending to the same kinds of allowances that have been regarded as salary or wages under definitions of 'salary or wages' that expressly include allowances.

260. In Mutual Acceptance, the High Court considered whether a fixed weekly payment to employees who used their own motor vehicles in the course of their duties was an 'allowance' and therefore 'wages' as defined the then Commonwealth Pay-Roll Tax Assessment Act 1941-42. The payment represented partial compensation for the motor vehicle expenses to be incurred by those employees.

261. In discussing what may be considered as the ordinary meaning of an 'allowance' Latham CJ in Mutual Acceptance stated that an allowance paid as compensation for unusual conditions of services:

... represents higher wages paid on account of special conditions, and may be fairly described as part of wages in the ordinary sense (emphasis added)

262. Mutual Acceptance was relied upon in Road & Traffic Authority of NSW v.Federal Commissioner of Taxation where the employees received fare allowances under the relevant award for travel to and from work. They were paid regardless of whether or not the employee incurred the expenditure. The question for decision was whether the allowances were expense payment benefits subject to fringe benefits tax or were within the definition of 'salary or wages' in former subsection 221A(1) of the ITAA 1936.

263. Hill J considered the allowance as additional compensation to the employees for their services. There was no need that the remuneration relate to specific services rendered, as long as the payments in question were given as remuneration for services generally. The fare allowances had no relationship to the actual cost of travel incurred by the employees. Accordingly, they were not reimbursements. The fare allowances were held to be 'salary or wages'.

266. An expense allowance is an allowance which is paid with the reasonable expectation that the money will be fully expended by the employee in the course of providing their services. The expense allowance is not given for the services of the employee, but rather in recognition of the expenditure that the employee will occur in the course of providing their services. As this type of allowance does not fall within the ordinary meaning of 'salary or wages', it does not form part of 'salary or wages' for the purposes of section 11. It also does not form part of an employee's OTE.

Application of the law to your circumstances

The allowance is paid for each day worked when an employee starts and finishes work on a site.

The allowance is not a reimbursement. The allowance is paid a set amount each day when employees come to work and finish the work shift at a site. The exception under paragraphs 72 and 73 of the SGR 2009/2 (relating to expense allowances) does not apply; the allowance is considered salary and wages and therefore forms part of OTE.

In Roads and Traffic Authority of New South Wales v Commissioner of Taxation [1993] FCA 314 the court considered the fringe benefits impact of a travel allowance ostensibly to compensate for the cost of public transport but was paid regardless of whether or not the employee used public transportation.

The court held that those payments constituted an additional compensation to the employees for their service. The allowance was not paid in relation to any deductible expenditure, it was paid regardless of whether or not it was expended, employees were not required to account for the allowance and were paid it even if they did not travel via public transport.

The allowance would not be an expense allowance as defined in SGR 2009/2.[3]

For the allowance to be OTE it must be at least 'in respect of' ordinary hours of work.

Both the Commissioner's view of the phrase and a consideration of the historical and textual considerations would lead to the conclusion that the phrase 'in respect of' allows for a wide meaning and that for an amount to be OTE it needs to have a discernible and tangible link to ordinary hours of work.

An employee must perform some amount of their ordinary hours of work in order to be entitled to the allowance. They must present themselves on site for their ordinary hours of work.

On either construction, as with Bindaree Beef, although the earnings in this case are not earnings for ordinary hours, when paid in relation to a shift or day of work that is or contains ordinary hours, they are referrable to ordinary hours in a way that makes them a payment 'in respect of' ordinary hours.

Therefore, the allowance is in respect of the employee's ordinary hours of work.

The Commissioner is of the opinion that the allowance paid to the employees in the circumstances as described above is OTE and therefore is subject to the superannuation guarantee payment. It is a payment made to the employee in respect of their employment as a reward for services provided to the Principal.

Conclusion

To constitute OTE for SG purposes, a payment must be considered earnings in respect of, or in connection with an employee's ordinary hours of work.

The allowance in respect of ordinary hours of work and as such is OTE.

[1] SGR 2009/2, paragraph 7.

[2] SGR 2009/2, paragraph 12.

[3] SGR 2009/2, paragraph 72.