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Edited version of administratively binding advice
Authorisation Number: 1012374661368
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Subject: Superannuation
Question 1
Do the public holiday penalty rates paid to full-time, part-time and casual managers form part of their ordinary time earning (OTE) for the purposes of the Superannuation Guarantee (Administration) Act 1992 (SGAA)?
Advice
Yes, the public holiday penalty rates paid to full-time, part-time and casual managers form part of their OTE for the purposes of the SGAA.
Question 2
Do the public holiday penalty rates paid to full-time, part-time and casual employees form part of their OTE for the purposes of the SGAA?
Advice
Yes, the public holiday penalty rates paid to full-time, part-time and casual employees form part of their OTE 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
The ATO received a request for administratively binding advice regarding whether public holiday penalty rates paid to full-time, part-time and casual employees and managers form part of OTE for the purposes of the SGAA for the financial year ended 30 June 2013.
We subsequently received the following information:
· A copy of the agreement under which the managers were engaged. It contained clauses relating to Definitions, Rosters, Hours of Work, Leave and Public Holidays
· A copy of the agreement under which the managers were engaged. It contained clauses relating to Definitions, Rosters, Hours of Work, Rates of pay, Penalty rates, Overtime, Leave and Public Holidays
· A copy of the Roster
Relevant legislative provisions
Superannuation Guarantee (Administration) Act 1992 subsection 6(1).
Reasons for decision
Summary
As the penalty rates are paid to your employees (including managers) to recompense them for the fact that their ordinary hours of work fall on a public holiday, it is considered that these payments are OTE for the purposes of the SGAA.
However, any additional amount paid to the employees or managers for any overtime worked on a public holiday would not be included in the definition of 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 is based on a percentage of the employee's 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) an unused annual leave payment, or unused long service leave payment, within the meaning of the Income Tax Assessment Act 1997; and
(C) (repealed by No 15 of 2007)
(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 penalty rates are paid to your employees (including Managers) to recompense them for the fact that their ordinary hours of work fall on a public holiday, it is considered that these payments are OTE for the purposes of the SGAA.
However, any additional amount paid to the employees or managers for any overtime worked on a public holiday would not be included in the definition of OTE for the purposes of the SGAA.
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