Edited version of private advice

Authorisation number: 1052272487526

Date of advice: 25 July 2024

Ruling

Subject: Non resident for taxation purposes

Question

Do the salary or wages paid by the Australian resident employer (the Employer) to a non-resident employee (the Employee) in respect of duties physically performed outside of Australia fall within section 27 of the Superannuation Guarantee (Administration) Act 1992 (SGAA) and be excluded from salary and wages for the purposes of SGAA?

Answer

Yes.

This advice applies for the following period:

Year ending 30 June 20XX

The scheme commenced on:

1 July 20XX

Relevant facts and circumstances

The Employer is an Australian private company

The Employer is registered for PAYG withholding on a monthly basis

The Employer employed the Employee on XX XXXX 20XX, whom was an Australian resident for taxation purposes.

The Employee left Australia permanently in XXXX 20XX and is a tax resident of another Country.

The Employee remains employed by the Employer, and carries out their work for the Employer outside of Australia

Since the Employee left, the Employer has continued to withhold from the Employee's salary or wages and continued to pay Superannuation Guarantee for the Employee

The Employer has continued to pay Superannuation Guarantee contributions into the Employee's Australian superannuation account.

Relevant legislative provisions

Superannuation Guarantee (Administration) Act 1992 section 15C

Superannuation Guarantee (Administration) Act 1992 section 27(1)

Social Security (International Agreements) Act 1999 section 5

Reasons for decision

The SGAA requires that an employer must provide the required minimum level of superannuation support each quarter for its eligible employees.

The term 'employee' is defined in section 12 of the SGAA as having its ordinary meaning. Under subsection 12(2), employee includes A person who is entitled to payment for the performance of duties as a member of the of a body corporate is, in relation to those duties, an employee of the body corporate

When an employer fails to make a minimum level of superannuation support for their employees by the due date, they are required to lodge a Superannuation Guarantee Charge Statement (SGC) and pay the SGC. The shortfall component of the SGC is calculated according to the formula detailed in section 19 of the SGAA, it is the required superannuation support percentage times employee's quarterly salary or wages.

General Exclusions

Subsection 27(1) of the SGAA provides that certain salary and wages are not to be taken into account for the purpose of making a calculation under section 19 of the SGAA.

The expression 'work done outside Australia' is used in paragraph's 27(1)(b) and 27 (1)(c) of the SGAA.

Paragraph 27(1)(b) of the SGAA relevantly refers to:

Salary and wages paid to an employee who is not a resident of Australia for work done outside Australia (except to the extent that the salary or wages relate to employment covered by a certificate under section 15c)

Work done outside Australia

In ATO ID 2012/75: superannuation guarantee; work done outside Australia, the Commissioner reviewed what constitutes 'Australia' as expressed in paragraph 27(1)(b) of the SGAA.

ATO ID 2012/75 concluded that:

In the phrase 'work done outside Australia' as used in subsection 27(1)(b) of the SGAA, 'Australia' is used in a geographical sense and extends to the outer limits of Australia's 'coastal sea'.

Further 'Australia' in that phase also includes the Territory of Cocos (Keeling) Islands, the Territory of Christmas Island, the 'coastal sea' of each of those Territories, and the Joint Petroleum Development Area.

Work done outside those areas, is 'work outside Australia' for the purposes of section 27(1)(b) of the SGAA.

You have advised that the work done outside Australia by the Employee is carried out in the country of XXXX.

Employment covered by a certificate under section 15C of the SGAA

A scheduled international social security agreement (as defined in section 5 of the Social Security (International Agreements) Act 1999) addresses the problem of double coverage of employees. This can occur where an employee is sent to work temporarily in another country and their employer is required to make superannuation contributions for them under the legislation of both countries. To overcome that problem, Australia has entered into scheduled international social security agreements with other countries, which have the effect that only the home country ' s superannuation scheme will apply.

Section 15C of the SGAA sets out the procedures for the application and issue of a certificate of coverage where a scheduled international social security agreement applies. Where an Australian employee is sent to work in a foreign country, an exemption from that country' s compulsory superannuation arrangements is only available if the employee remains covered by Australia's SGAA while working overseas. To qualify for the exemption, the employer must apply to the ATO for a "Certificate of Coverage".

Australia currently has 31 bilateral agreements.

The employment with the Employee is not covered by a Certificate of Coverage under section 15C of the SGAA.

In your case

The Employee is considered an employee of the Employer, a minimum superannuation is required for the Employee unless one of exclusion applies under section 27 of SGAA.

You have advised that the Employee is a non-resident for taxation purposes and resides permanently in another country, where they are a resident.

You have stated that the work done outside Australia by the Employee is outside of the coastal seas of Australia and that the Employee is a non-resident for taxation purposes.

Work performed by the Employee outside Australia meets the definition of 'work done outside Australia' under paragraph 27(1)(b) of the SGAA. The salary or wages paid to the Employee do not relate to employment covered by a certificate under section 15C of the SGAA (concerning international social security Agreements). Therefore, exclusion under paragraph 27(1)(b) of SGAA applies.

Accordingly, salary or wages paid to the Employee are not to be taken into account for the purpose of making a calculation under section 19 of the SGAA.

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).