| Disclaimer This edited version has been archived due to the length of time since original publication. It should not be regarded as indicative of the ATO's current views. The law may have changed since original publication, and views in the edited version may also be affected by subsequent precedents and new approaches to the application of the law. You cannot rely on this record in your tax affairs. It is not binding and provides you with no protection (including from any underpaid tax, penalty or interest). In addition, this record is not an authority for the purposes of establishing a reasonably arguable position for you to apply to your own circumstances. For more information on the status of edited versions of private advice and reasons we publish them, see PS LA 2008/4. |
Edited version of administratively binding advice
Authorisation Number: 1012117785594
This edited version of your advice will be published in the public Register of private binding rulings after 28 days from the issue date of the advice. The attached ATO advice fact shee has more information.
Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. Contact us at the address given in the fact sheet if you have any concerns.
Subject: Superannuation Guarantee - ordinary time earnings
Question:
Does a payment made to an employee as rental assistance in a rural area form part of ordinary time earnings (OTE) for the purposes of subsection 6(1) of the Superannuation Guarantee (Administration) Act 1992 (SGAA)?
Advice:
Yes, the payment forms part of OTE.
This advice applies for the following period:
Year ending 30 June 2013
The arrangement commences on:
After 1 July 2011
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.
You operate an enterprise in a rural area.
You are considering hiring an employee and an amount will be paid to the employee to offset the cost of renting in the rural area.
The amount to be paid to the employee will be included in the normal wage of the employee and tax will be withheld accordingly.
Relevant legislative provisions
Superannuation Guarantee (Administration) Act 1992 subsection 6(1)
Reasons for decision
Summary
The payment is considered to be an over award payment and forms part of OTE.
Superannuation guarantee payments need to be made for all OTE payments.
Detailed reasoning
Under the SGAA an employer must provide the required minimum level of superannuation support for its employees by the quarterly due date (unless the employees are exempt employees) or pay the superannuation guarantee charge. 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 time earnings
OTE, in relation to an employee, is defined in subsection 6(1) of the SGAA. It refers to the lesser of:
the total of the employee's earnings in respect of ordinary hours of work (other than lump sum payments made on termination of employment in lieu of unused sick leave, long service leave or annual leave) and earnings consisting of over-award payments, shift-loading or commission, or
the maximum contribution base for the contribution period.
The Commissioner's views on OTE, as defined in the SGAA, including information on allowances 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 are 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.
Allowances
Certain specific types of payments are OTE as they are additional payments paid to employees to recognise or compensate for certain conditions relating to their employment such as site allowance, dirt allowance and casual loading.
These kinds of payment are OTE except in certain circumstances such as where they related solely to hours of work other than ordinary hours of work
SGR 2009/2 outlines when payments are considered to be ordinary time earning for. Paragraph 27 states:
Many employees receive various additional payments that are described as allowances or loadings and that are paid to employees to recognise or compensate for certain conditions relating to their employment. For example:
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
These kinds of payment 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 (see paragraph 72 of this Ruling); or
relate solely to hours of work other than ordinary hours of work (see paragraphs 41 to 43 of this Ruling).
Paragraph 72 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'.
The additional payment is not in respect of an employment related expense, it is in the nature of an 'over award' payment.
In your case you are making a payment in addition to the employee's normal salary and wages (tax is withheld). The payment is considered to be an over award payment which is specifically included as part of OTE in subparagraph (a)(ii) of the definition of ordinary time earnings in subsection 6(1) of the SGAA..
Copyright notice
© Australian Taxation Office for the Commonwealth of Australia
You are free to copy, adapt, modify, transmit and distribute material on this website as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products).
