Edited version of administratively binding advice

Authorisation Number: 1012410769227

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Advice

Subject: Superannuation Guarantee - Ordinary Time Earnings

Question

Should the public holiday rate of pay (double time and a half of the ordinary rate of pay) be included when calculating an employee's ordinary time earnings (OTE) for the purposes of subsection 6(1) of the Superannuation Guarantee (Administration) Act 1992 (SGAA)?

Advice:

Yes, please see 'Explanation' below.

This advice applies for the following period

For the period of operation of the Award.

Relevant facts and circumstances

Your 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. The fact sheet has more information about relying on ATO advice.

· The employer wishes to ascertain whether it is obliged to calculate and pay superannuation guarantee on the penalties paid to employees who work on public holidays.

· The employer has been calculating and paying superannuation guarantee on the full amounts of payments made for work done on public holidays.

· The employer employs under the Award.

· Sections and Clauses of the Award are provide for types of employment, ordinary hours of work (including the span of hours for day workers and shift workers), Overtime and penalty rates, Shift work and Public holiday payments.

Relevant legislative provisions

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

Explanation

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) a payment in lieu of unused annual leave within the meaning of subsection 26AC(1) of the Income Tax Assessment Act 1936 (ITAA);

(C) a payment in lieu of unused long service leave within the meaning of subsection 26AD(1) of the ITAA; and

(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.

Application to your circumstances

A subclause of the Award provides that payment for work on public holiday will be at double time and a half of the ordinary rate of pay for all hours worked. This clause relates to where an employee is required to perform duties that form part of their ordinary hours of work on a public holiday.

Public holiday penalty rates that are paid, under the above subclause of the Award, to your employees to recompense them where their ordinary hours of work fall on a public holiday are OTE for the purposes of the SGAA.

Conversely, where an employee is required to work on a public holiday as overtime (i.e. over and above the ordinary hours of work for an employee), this is covered in the Award by separate subclauses.

Any amount paid, under the clauses of the Award relating to overtime and penalty rates, to the employees for overtime worked on a public holiday would not be included in the definition of OTE for the purposes of the SGAA.