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Edited version of administratively binding advice
Authorisation Number: 1012269030311
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Subject: Administrative binding advice
Question
Is the monetary compensation received by workers for the supervision of trainee workers considered ordinary time earnings for the purposes of the Superannuation Guarantee (Administration) Act 1992?
Advice
Yes, the monetary compensation received by workers for the supervision of trainee workers is considered ordinary time earnings for the purposes of the SGAA.
This advice applies for the following period:
1 July 2012 - 30 June 2013
The arrangement commences on:
1 July 2012
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.
A request for administratively binding advice was received regarding whether the monetary compensation received by workers for the supervision of trainee workers is considered to be part of the ordinary time earnings (OTE) of the supervising worker under section 6 of the SGAA.
Relevant legislative provisions
Superannuation Guarantee (Administration) Act 1992 section 6 and
Superannuation Guarantee (Administration) Act 1992 subsection 6(1).
Reasons for decision
Summary
As the amounts paid to the workers are to recompense them for the additional duties undertaken during their ordinary hours of work, it is considered that these payments are OTE for the purposes of the SGAA.
Detailed reasoning
The SGAA imposes a charge called the superannuation guarantee charge (SGC) on all employers. Employers can reduce the amount of the SGC they need to pay by making minimum superannuation contributions for their non-exempt employees by the relevant cut off date. The amount of the superannuation contributions paid to a complying superannuation fund or retirement savings account (RSA) based on a percentage of the employee's ordinary time earnings (OTE).
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) a payment in lieu of unused annual leave within the meaning of subsection 26AC(1) of the Income Tax Assessment Act 1936 (ITAA);
(C) a payment in lieu of unused long service leave within the meaning of subsection 26AD(1) of the ITAA; and
(ii) earnings consisting of over-award payment, shift loading or commission; or
(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.
An employee's 'earnings', for the purpose of the definition of OTE, is the remuneration paid to the employee as a reward for the employee's services.
The term 'in respect of' means to have some connection with. For the definition of OTE, a payment will be taken to be earnings in respect of ordinary hours of work if it is made:
· for attendance, or for work done, in those hours; or
· to satisfy an entitlement that accrued as a result of attending, or working, in those hours.
Superannuation Guarantee Ruling SGR 2009/2 Superannuation guarantee: meaning of the terms 'ordinary time earnings' and 'salary or wages' (SGR 2009/2) explains that an amount can only be part of an employee's OTE if it is 'salary or wages' of the employee. However, the ruling also explains that 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.
Therefore, as the amounts paid to the workers are to recompense them for the additional duties undertaken during their ordinary hours of work, it is considered that these payments are OTE for the purposes of the SGAA.
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