Edited version of private advice

Authorisation Number: 1051777356138

Date of advice: 10 November 2020

Ruling

Subject: Superannuation - employees

Question

Are the board members of a charity employees for the purposes of Superannuation?

Answer

Yes

This ruling applies for the following periods

Year ending 30 June 20XX

Year ending 30 June 20XX

Year ending 30 June 20XX

Year ending 30 June 20XX

The scheme commenced on

1 July 20XX

Relevant facts

A charity is an Australian Charities and Not-for-profit Commission (ACNC) registered charity with Fringe Benefit Exemption status as a Public Benevolent Institution.

The charity is governed by a Board of Directors, who in the past have been paid a small meeting allowance to cover out-of-pocket expenses. Board meetings are held monthly. The Board has this year updated and endorsed a Board Director Role Description and Board Director Remuneration policy.

It is proposed to increase annual payments to the chairman, a lesser amount to each of the deputy chairmen and treasurer, and a further lesser amount to the other four board members.

Each Director supports and works with the Chairperson and other Directors to oversee and direct the organisation to thrive whilst adhering to the charity mission, goals, values, policies and objectives. Every Director plays an active part in the strategic direction and planning of the charity covering a range of duties and responsibilities, skills and experience.

The constitution of the charity allows for payment to board members in the ordinary course of business.

Relevant legislative provisions

Superannuation Guarantee (Administration) Act 1992 Subsection 11(1)

Superannuation Guarantee (Administration) Act 1992 Subsection 12(1)

Reasons for decision

Are the board members of a charity employees for the purposes of Superannuation?

The terms 'employer' and 'employee' are defined in section 12 of the Superannuation Guarantee (Administration) Act 1992 (SGAA):

12(1) [Definitions]

Subject to this section, in this Act, employee and employer have their ordinary meaning. However, for the purposes of this Act, subsections (2) to (11):

(a)  expand the meaning of those items; and

(b)  make particular provision to avoid doubt as to the status of certain persons.

12(2) [Members of board of directors, etc]

A person who is entitled to payment for the performance of duties as a member of the executive body (whether described as the board of directors or otherwise) of a body corporate is, in relation to those duties, an employee of the body corporate.

The term 'salary or wages' is defined in subsection 11(1) of the SGAA to include

(b)  payment for the performance of duties as a member of the executive body (whether described as the board of directors or otherwise) of a body corporate;

Superannuation Guarantee Ruling SGR 2005/1 Superannuation guarantee: who is an employee? (SGR 2005/1) states at paragraph 62:

Under subsection 12(2) of the SGAA, a person who is entitled to payment for the performance of duties as a member of the executive body (whether described as the board of directors or otherwise) of a body corporate is, in relation to those duties, an employee of the body corporate.

The footnote for the term 'body corporate' states that it is a general term to describe an artificial entity having a separate legal existence.

It is proposed to increase annual payments to the chairman, a lesser amount for the deputy chairman and treasurer, and a further lesser amount for the other four board members. The proposed increased payments are more than nominal out-of-pocket expenses, and are paid at different levels reflecting responsibilities and performance of duties.

It is accepted that board members of the charity are persons who are entitled to payment for the performance of duties as members of an executive body of a body corporate. The board members are therefore employees of the charity for the purposes of superannuation.

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