Edited version of administratively binding advice

Authorisation Number: 1012361985959

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 sheet 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.

Advice

Subject: Superannuation guarantee

Question

Does the Mobilisation and Demobilisation payment defined in the Agreement which was approved by Fair Work Australia (FWA) (the Agreement) form part of the ordinary time earnings (OTE) of the employees of the employer?

Advice

Yes, the Mobilisation and Demobilisation payment defined in the Agreement does form part of the employee's OTE.

This advice applies for the following period:

31 July 2012 to 30 June 2016

Relevant facts and circumstances

The Commissioner received correspondence from the applicant requesting advice in relation to whether the mobilisation and demobilisation allowance paid forms part of the employees' OTE.

The Agreement provides that a non-local employee is an employee whose usual place of residence is more than a specified distance from the work site. The Employer provides these non-local employees travel by economy air transport from the airport nearest to the Employee's usual place of residence, to the work site at the commencement of employment and return, at the conclusion of employment. Upon this travel to/from the worksite a non-local employee shall be paid eight hours interstate, or four hours intrastate, at the Employee's base hourly rate.

Relevant legislative provisions

Superannuation Guarantee Administration Act 1992 Subsection 6(1)

Reasons for decision

Summary

The travel time payment as defined the Agreement does form part of the employee's OTE.

Detailed reasoning

The Superannuation Laws Amendment (2004 Measures No 2) Act 2004 simplified the earnings base of an employee for superannuation guarantee (SG) purposes. These amendments which apply from 1 July 2008 have the effect that all employers need to calculate their SG liability against an employee's OTE, as defined in the Superannuation Guarantee (Administration) Act 1992 (SGAA).

Employers may still be required to use notional earnings bases specified in legislation or industrial agreements as the basis of their superannuation support in cases where these are above an employee's OTE, but SGAA obligations will only be assessed against OTE.

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

a) the total of the employee's earnings in respect of ordinary hours of work and earnings consisting of over award payments, shift loading or commission, but does not include lump sum payments made on termination of employment in lieu of unused sick leave, unused annual leave and unused long service leave; or

b) the maximum contribution base for the quarter - the maximum contribution base, which is the maximum limit on the amount of superannuation support that an employer is expected to provide for the benefit of an employee. The maximum contribution base for the 2011/12 year of income is $43,820 per quarter. This amount is indexed annually according to the indexation factor.

The Commissioner's views on OTE generally, including an employee's ordinary hours of work, are included in Superannuation Guarantee Ruling SGR 2009/2 Superannuation guarantee: meaning of the terms 'ordinary time earnings' and 'salary or wages'.

Paragraph 12 of SGR 2009/2 provides the meaning of 'earnings' and states:

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 practical effect for superannuation guarantee purposes is that the expression 'earnings' means 'salary or wages'.

Paragraphs 13 to 18 of SGR 2009/2 address the meaning of 'ordinary hours of work' and state:

13. An employee's ordinary hours of work' are the hours specified as his or her 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.

14. The document need not use the exact expression 'ordinary hours of work', but it needs to draw a genuine distinction, for the purposes of the award or agreement, between ordinary hours and 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.

15. Any hours worked in excess of, or outside the span (if any) of, those specified ordinary hours of work are not part of the employees 'ordinary hours of work'.

16. If the ordinary hours of work are not specified in a relevant award or agreement, the 'ordinary hours of work' are the normal, regular, usual or customary hours worked by the employee, as determined in all the circumstances of the case. This is not necessarily the minimum or maximum number of hours worked or required to be worked.

17. In such cases, it may often not be possible or practicable to determine the normal, regular, usual or customary hours of an employee's work. If so, the actual hours worked should be taken to be the ordinary hours of work.

18. 'Ordinary hours of work' are not necessarily limited to hours to be worked between 9am and 5pm, Monday to Friday. 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.

Paragraphs 25 and 26 of SGR 2009/2 specify that earnings 'in respect of ordinary hours of work' means all earnings other than overtime. Paragraphs 25 and 26 state:

25. All amounts of earnings in respect of employment are in respect of the employee's ordinary hours of work unless they are remunerated for working overtime hours, or are otherwise referrable 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 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.

Paragraph 27 to 40 of SGR 2009/2 identify certain specific payments that are OTE. These certain specific payments include allowances and loadings, bonuses, piece rates, paid leave and holiday pay, top-up payments, payments in lieu of notice, workers' compensation payments (where the employee is required to work) and directors fees.

Paragraph 27 of SGR 2009/2 relates to allowances and loadings and states:

27. 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. 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 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…..

· relate solely to hours of work other than ordinary hours (see paragraphs 41 to 42 of this Ruling).

Application of the law to your circumstances

The employees are engaged under an employment agreement.

In your application you have requested advice on whether a travel time payment provided in the Agreement forms part of the employees' OTE.

The travel time payment is paid to non-local employees for the time taken to travel between the employee's usual place of residence and the work site upon commencement and conclusion of employment.

The Agreement provides that non-local employees will be paid at their base hourly rate for eight (8) hours for interstate travel and four (4) hours for intrastate travel for both travel time before and after duty.

Paragraph 27 of SGR 2009/2 provides that employees may receive additional payments that are paid to employees to recognise or compensate for certain conditions relating to their employment.

Appendix 2 - Explanation to SGR 2009/2 is provided as information to help understand how the Commissioner's view has been reached. In respect of allowances paragraph 264 states:

An allowance can also be paid to compensate for particular working conditions, for example height, dust or danger. These types of allowances are not expended in the course of the employee's work, but rather, are paid as compensation for the conditions applying to the job.

Conclusion

As the mobilisation and demobilisation payment is paid to compensate the Non-Local Employees for the time taken for travel between their Usual Place of Residence and the work site upon commencement and conclusion of employment, this payment is considered to be an allowance and therefore does form part of the employee's OTE.

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).