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This edited version has been archived due to the length of time since original publication.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: 1012733733574

Advice

Subject: Ordinary time earnings (OTE)

Question 1

Does the overtime crib breaks defined in the agreement (the Agreement) form part of the employees' OTE?

Advice

No, the crib break defined in the Agreement does not form part of the employees' OTE where it is paid in relation to overtime hours.

Question 2

Does the overtime paid break defined in the award (the Award) form part of the employees' OTE?

Advice

No, the paid break as defined in the Award does not form part of the employees' OTE where it is paid in relation to overtime hours.

This advice applies for the following period:

Year ending 30 June 2015

Year ending 30 June 2016

Year ending 30 June 2017

Year ending 30 June 2018

The arrangement commences on:

1 July 2014

Relevant facts and circumstances

We received an application for advice in regards to the treatment of crib payments paid during overtime hours.

You agreed to receive administratively binding advice in regards to employees engaged under the Agreement and the Award.

The Agreement describes ordinary hours and overtime and defines certain crib payments being paid for overtime.

The Award describes ordinary hours and overtime and defines certain crib payments as being paid for overtime.

Relevant legislative provisions

Superannuation Guarantee (Administration) Act 1992 (SGAA) section 6(1)

Reasons for decision

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

The phrase 'ordinary time earnings' is defined in subsection 6(1) of the SGAA as follows:

In broad terms (and subject to some exceptions), OTE of an employee means earnings in respect of ordinary hours of work. Payments for work performed outside the ordinary hours of work, such as overtime payments, are not OTE.

OTE is usually the amount an employee earns for their ordinary hours of work. It includes commissions, shift-loadings and some allowances, but does not include overtime payments.

The Commissioner's views on OTE are included in Superannuation Guarantee Ruling SGR 2009/2 Superannuation guarantee: meaning of the terms 'ordinary time earnings' and 'salary or wages'. (SGR 2009/2).

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

Paragraphs 13 to 18 of SGR 2009/2 outline the meaning of 'ordinary hours of work'. It states:

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

Application of the law to your circumstances

Question 1

Under paragraph 25 of SGR 2009/2, all amounts of earnings are in respect of the employees ordinary hours of work unless they are remunerated for working overtime hours, or are referrable only to overtime hours.

Therefore it holds that all payments associated with crib breaks, taken during overtime, are also excluded from OTE. Therefore it is necessary to determine which crib break payments, as described in the Agreement, is associated with overtime and which crib break payments is associated with employees' ordinary hours of work.

The Agreement describes ordinary hours and overtime. Certain crib payments are paid during overtime. Under these circumstances the crib break payment is clearly in relation to overtime hours and it is therefore not OTE.

In conclusion, whether crib break payments are considered OTE depends on what hours the crib break is in relation to. Where the crib break is given during genuine overtime hours, the payment in relation to the crib break is not OTE.

Question 2

The Award describes overtime for employees. Where genuine overtime is worked which is not OTE, and an employee receives a paid break during this time then, as above, the break payment is in relation to overtime work and is not OTE.


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