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Advice

Subject: Superannuation Guarantee

Based on the information provided, the hours worked outside of ordinary hours by workers employed by the employer under the awards do not form part of ordinary time earnings (OTE) under the SGAA.

Please see 'Reasons for decision'.

This advice applies for the following period:

1 July 2009 to 30 June 2012

The arrangement commences on:

1 July 2009

Relevant facts and circumstances

Your advice is based on the facts stated in the description of the scheme that is set out below. If your circumstances are significantly different from these facts, this advice has no effect and you cannot rely on it. The fact sheet has more information about relying on ATO advice.

The Commissioner received a valid request for administratively binding advice (ABA) from the employer with respect to OTE and superannuation guarantee paid to workers. The request included the following information:

You required a dollar amount for superannuation that is required to be paid under the following three scenarios:

Scenario A: An employee starting at 2.00 pm and finishing at 10.00pm Monday to Friday working an average of 8 hours per night

Scenario B: An employee starting at 5.30pm and finishing at 9.30pm Monday to Friday working an average of 4 hours per day

Scenario C: An employee starting at 8.00am and finishing at 4.30pm working Thursday, Friday, Saturday, Sunday and Monday working an average of 8 hours per day.

You requested that we take into account that some of the workers are employed under a particular award, and that the span of ordinary hours identified in this award are 5.30am to 6.30pm therefore overtime is paid outside this span of hours.

You requested that we also provide advice on the same scenarios for the other awards that employees are covered by.

The Tax Officer confirmed with the employer that:

The Tax Office also clarified that the employer wanted the advice to apply to both casual and permanent employees.

Relevant legislative provisions

Superannuation Guarantee Administration Act 1992 6(1)

Reasons for decision

Question 1

Summary

Hours worked by the employees of the employer outside of the span of ordinary hours as defined in the awards, are not included in the definition of OTE in section 6(1) of the SGAA.

Detailed reasoning

The SGAA states that an employer must provide the prescribed minimum level of superannuation support for its eligible employees by the quarterly due date, or pay the superannuation guarantee charge (SGC). The minimum level of support is calculated by multiplying the charge percentage (currently 9%) 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 times earnings

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

The SGAA does not define the expression 'earnings in respect of ordinary hours of work' or any of the terms in that expression.

The Commissioner's views on OTE, as defined in the SGAA, including information on the difference between allowances, expense allowances and reimbursements, are contained in Superannuation Guarantee Ruling SGR 2009/2 Superannuation guarantee: meaning of the terms 'ordinary time earnings' and 'salary or wages' (SGR 2009/2) which is effective from 1 July 2009.

OTE is generally what employees earn for their ordinary hours of work, including commissions, allowances (excluding expense allowances) and paid leave and do not include reimbursements or overtime payments.

Ordinary hours of work

The meaning of 'ordinary hours of work' is discussed in SGR 2009/2 to be an employee's ordinary hours of work under the relevant award or agreement, or under the combination of such documents, that governs the employee's conditions of employment.

An employee's ordinary hours of work are distinct from 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.

Any hours worked in excess of those standard hours set out in an award or agreement, are not generally 'ordinary hours of work'. However, if it is evident from an objective assessment of the employee's regular work pattern, that the hours actually worked are consistently different to those prescribed as 'standard', the 'ordinary hours of work' for that employee may be determined based on that regular work pattern.

'Ordinary hours of work' are not limited to hours to be worked between 9am and 5pm, Monday to Friday as they may (depending on the provision in the relevant award or agreement, if any) include hours to be worked at other times, including at night, on weekends or on public holidays.

The ordinary hours of work for employees are specified in the three awards.

To constitute OTE, a payment must be made with respect to an employee's ordinary hours of work. That is, it must be paid for attendance or work done by the employee in those hours, or to satisfy an entitlement that accrued as a result of them attending, or working in those hours.

Earnings 'in respect of ordinary hours of work' means all earnings other than overtime

For a payment to constitute earnings in respect of ordinary hours of work the payment must be considered earnings of the employee and the earnings must be in respect of the employee's ordinary hours of work.

An employee's earnings for the purposes of the definition of OTE in the SGAA is the remuneration paid to the employee as reward for the employee's services.

Paragraph 25 of SGR 2009/2 states that all amounts of earnings in respect of employment are in respect of the employee's ordinary hours or 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.

Conclusion

You have provided three scenarios of hours worked by employees under the awards. In each instance, payments made to employees for ordinary hours worked are subject to superannuation guarantee under section 6(1) of the SGAA. Payments made to employees under these awards for overtime hours, that is, hours outside of the span of ordinary hours, are not subject to superannuation guarantee.

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