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This edited version has been archived due to the length of time since original publication.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.

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Edited version of your written advice

Authorisation Number: 1012693746295

Advice

Subject: Superannuation Guarantee

Question 1

What are the ordinary hours of work of the employees engaged under an agreement for the purposes of subsection 6(1) of the Superannuation Guarantee (Administration) Act 1992 SGAA?

Advice

The ordinary hours of work of the employees are 40 hours per week.

Question 2

What are the ordinary time earnings (OTE) of the employees, under the agreement for superannuation guarantee (SG) purposes under subsection 6(1) of the SGAA?

Advice

The OTE are the earnings, paid at the all-inclusive rate of pay, in respect of 40 hours per week.

This advice applies:

After 1 July 2013.

Relevant facts and circumstances

The 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.

1. The employer wrote to us requesting advice in relation to their superannuation guarantee (SG) obligations. The application provided the following information:

2. The agreement specifies the following:

Relevant legislative provisions

Superannuation Guarantee (Administration) Act 1992 Subsection 6(1).

Reasons for decision

Summary

The ordinary hours of work for the employees are 40 hours per week.

The OTE of the employees for the purposes of subsection 6(1) of the SGAA are the earnings in respect of 40 hours per week, calculated at the all-inclusive rate of pay.

Detailed reasoning

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.

Subsection 6(1) of the SGAA defines OTE in relation to an employee to mean:

The maximum contribution base for the 2014-15 year of income is $49,430 per quarter. This amount is indexed annually according to the indexation factor.

Superannuation Guarantee Ruling SGR 2009/2 Superannuation guarantee: meaning of the terms 'ordinary time earnings' and 'salary or wages' (SGR 2009/2) explains the meaning of OTE as defined in subsection 6(1) of the SGAA. The meaning of OTE is relevant to employers for the purposes of calculating the minimum level of superannuation support required for individual employees under the SGAA.

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

In accordance with its ordinary definition, overtime is regarded as work done by employees in reflex to business needs which would be expected to vary, rather than be the normal hours worked as per the work rosters.

The Commissioner's view on what earnings are taken to be made 'in respect of ordinary hours of work' is provided in paragraph of SGR 2009/2 which states:

Accordingly, in line with the above, all amounts of earnings in respect of employment should be considered to be in respect of the employee's ordinary hours of work unless they are remuneration for overtime or other hours that are not ordinary hours of work.

Application of the law to your circumstances

In this case, the agreement specifies that the hours of work for a full time employee will be an average of 40 hours per week. The agreement further specifies that superannuation will be paid on an earnings base of 40 hours per week at the relevant hourly rate for the employee.

Paragraph 14 of SMSFR 2009/2 provides that the relevant award or agreement must draw a genuine distinction between ordinary hours and other hours. Furthermore, it is expected that these other hours, typically described as overtime, are remunerated at a higher rate of pay than the ordinary hours or are otherwise identifiable as a separate component of the total pay in respect of non-ordinary hours.

Paragraph 25 of SMSFR 2009/2 further provides that all amounts of earnings in respect of employment are in respect of the employee's ordinary hours of work unless they are remunerated for overtime hours worked.

In applying paragraph 14 of SMSFR 2009/2 to this case, the agreement specifies that the rostered hours of work are an average 40 hours per week. These hours are paid a flat rate of pay. Whilst the agreement doesn't specify the employees 'ordinary hours of work', paragraph 14 provides that the agreement does not need to use the exact expression 'ordinary hours of work'. Therefore, we consider that as the agreement specifies the employees' rostered hours as 40 hours per week, these hours are the employees 'ordinary hours of work'.

Hours in excess of 40 hours per week are considered to be 'other hours' and the earnings in respect of these 'other hours' are identifiable as a separate component of the total pay in respect of non-ordinary hours of work.

For employees who work at the employer's worksite, their ordinary hours of work are an average of 40 hours per week.

For employees who are engaged as part of the labour hire team and work offsite, their ordinary hours of work are an average of 40 hours per week for each week of the roster cycle.

For example, in the agreement, employees engaged as part of the labour hire team offsite shall work 12 hours shifts on a two week on, two week off basis, that is, 168 hours in a cycle. For each week of the roster cycle, the employees ordinary hours of work are 40 hours, ie: 4 weeks at 40 hours per week, totalling 160 hours per 4 week roster cycle.

In applying paragraph 25 of SGR 2009/2 to this case, it is considered that the average hours in excess of 40 hours per week are referrable to hours that are not ordinary hours of work and are therefore, the earnings in respect of the hours in excess of 40 hours per week are not earnings 'in respect of the employees' ordinary hours of work.

Conclusion

The agreement specifies that for employees' who work at the employer's worksite, the hours of work are an average of 40 hours per week and we consider that 40 hours per week are the employees' ordinary hours of work.

The agreement specifies, that for employees who work as part of the labour hire team offsite, the hours of work are an average of 40 hours per week for each week of the roster cycle and we consider that 40 hours per week are the employees' ordinary hours of work.

The agreement further specifies that superannuation will be paid on an earnings base of 40 hours per week. We consider that the employees ordinary time earnings for the purposes of subsection 6(1) of the SGAA are the earnings in respect of 40 hours per week, which are paid at the all-inclusive or flat rate of pay.


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