Edited version of administratively binding advice

Authorisation Number: 1012437648289

Advice

Subject: Ordinary time earnings

Question 1

Do the ordinary hours of 7.2 hours per day (36 hours per week) as defined in a clause of the Agreement form part of the ordinary time earnings (OTE) as defined in section 6(1) of the Superannuation Guarantee (Administration) Act 1992 (SGAA), of the employees of the Employer?

Advice/Answers

Yes, the ordinary hours of 7.2 hours per day (36 hours per week) as defined in a clause of the Agreement do form part of the employees' OTE.

Question 2

Do the ordinary hours of 0.8 hours per day contribution to Rostered Days Off (RDOs) as defined in a clause of the Agreement form part of the employees' OTE?

Advice/Answers

No, the ordinary hours of 0.8 hours per day contribution to RDOs as defined in a clause of the Agreement do not form part of the employees' OTE.

Question 3

Do RDOs paid during Rest and Recreation (R&R) week or on termination of employment as defined in a clause of the Agreement form part of the employees' OTE?

Advice/Answers

Yes, the RDOs paid during R&R week or on termination of employment as defined in a clause of the Agreement do form part of the employees' OTE

Question 4

Do the overtime hours defined in a clause of the Agreement form part of the employees' OTE?

Advice/Answers

No, the overtime hours defined in a clause of the Agreement do not form part of the employee's OTE

Question 5

Does the Crib Break defined in a clause of the Agreement form part of the employees' OTE?

Advice/Answers

No, the Crib Break defined in a clause of the Agreement does not form part of the employees' OTE

Question 6

Which of the following allowances as defined in a clause of the Agreement form part of the employees' OTE?

· All Purpose Allowance

· Flat Allowance - Daily Travel Allowance

· Flat Allowance - Supplementary Travel Allowance

· Flat Allowance - Meal Allowance

· Flat Allowance - First Aid Allowance

Advice/Answers

The following allowances as defined in a clause of the Agreement form part of the employees' OTE:

· All Purpose Allowance

· Flat Allowance - Daily Travel Allowance

· Flat Allowance - Supplementary Travel Allowance

· Flat Allowance - First Aid Allowance

· The Flat Allowance - Meal Allowance as defined in a clause of the Agreement does not form part of the employees' OTE.

Question 7

Does the R&R travel payment defined in clauses of the Agreement form part of the employees' OTE?

Advice/Answers

Yes, the R&R travel payment defined in clauses of the Agreement does form part of the employees' OTE.

Question 8

Does a locality allowance defined in a clause of the Agreement form part of the employees' OTE?

Advice/Answers

Yes, the locality allowance defined in a clause of the Agreement does form part of the employees' OTE in respect of 36 ordinary hours of work.

Question 9

Does the Living Away From Home Allowance (LAFHA) defined in a clause of the Agreement form part of employees' OTE?

Advice/Answers

No, the LAFHA defined in a clause of the Agreement does not form part of the employees' OTE.

Question 10

Does a mobilisation and demobilisation payment (MDP) defined in a clause of the Agreement form part of the employees' OTE?

Advice/Answers

Yes, a MDP defined in a clause of the Agreement does form part of the employees' OTE.

Relevant facts and circumstances

Your advice is based on the facts stated in the description of the scheme provided. 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.

An Agent requested advice in respect of whether the payments in the following categories of the Agreement formed part of the employees' OTE.

1. Base hours (36 hours)

2. Base hours (RDO accrual)

3. Rostered days off (RDO) paid in rest and recreation week

4. Overtime

5. Crib Break in overtime

6. Flat allowance - All purpose allowance

7. Flat allowance - Daily Travel allowance

8. Flat Allowance -Supplementary Travel allowance

9. Flat allowance - Meal allowance

10. Flat Allowance - First aid allowance

11. Flat allowance -Locality Allowance

12. Living away from home allowance

13. Mobilisation and demobilisation payment

Relevant legislation

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

Fringe Benefits Tax Assessment Act 1986

Reasons for decision

Issue 1

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.

In effect this means employers can no longer use earnings bases specified in industrial awards, superannuation schemes, occupational superannuation arrangements or a law of the Commonwealth, State or Territory to satisfy their requirements in meeting their SGAA liability.

OTE, in relation to an employee, is defined in subsection 6(1) of the SGAA and is the lesser of:

(a) the total of the employee's earnings in respect of ordinary hours of work and earnings consisting of over award payments, shift loading or commission, but does not include lump sum payments made on termination of employment in lieu of unused sick leave, unused annual leave and unused long service leave; or


(b) the maximum contribution base for the quarter - the maximum contribution base, which is the maximum limit on the amount of superannuation support that an employer is expected to provide for the benefit of an employee. The maximum contribution base for the 2012/13 year of income is $45,750 per quarter. This amount is indexed annually according to the indexation factor.

The Commissioner's views on OTE generally, including an employee's ordinary hours of work, 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:

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 practical effect for superannuation guarantee purposes is that the expression 'earnings' means 'salary or wages'.

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

13. An employee's ordinary hours of work' are the hours specified as his or her ordinary hours of work under the relevant award or agreement, or under the combination of such documents, that governs the employee's conditions of employment.

14. The document need not use the exact expression 'ordinary hours of work', but it needs to draw a genuine distinction, for the purposes of the award or agreement, between ordinary hours and other hours. In particular, it would be expected that the other hours are remunerated at a higher rate (typically described as overtime) than the ordinary hours, or otherwise identifiable as a separate component of the total pay in respect of non-ordinary hours.

15. Any hours worked in excess of, or outside the span (if any) of, those specified ordinary hours of work are not part of the employees 'ordinary hours of work'.

16. If the ordinary hours of work are not specified in a relevant award or agreement, the 'ordinary hours of work' are the normal, regular, usual or customary hours worked by the employee, as determined in all the circumstances of the case. This is not necessarily the minimum or maximum number of hours worked or required to be worked.

17. In such cases, it may often not be possible or practicable to determine the normal, regular, usual or customary hours of an employee's work. If so, the actual hours worked should be taken to be the ordinary hours of work.

18. 'Ordinary hours of work' are not necessarily limited to hours to be worked between 9am and 5pm, Monday to Friday. They may (depending on the provision in the relevant award or agreement, if any) include hours to be worked at other times, including at night, on weekends or on public holidays.

Paragraphs 20 to 22 identify payments that are specifically included in the definition of 'ordinary time earnings' in subsection 6(1) of the SGAA. Paragraphs 20 to 22 state:

20. Earnings consisting of over-award payments, shift-loadings or commission are specifically included in the definition of OTE by subparagraph (1)(ii) of that definition in subsection 6(1).

Over-award payments

21. An over-award payment is the component of a payment in excess of an award entitlement. The Commissioner's view is that the specific inclusion of these payments does not apply to over-award payments that are specifically referrable to hours worked that are not ordinary time hours. For example, an employer's policy may be to offer a higher rate of overtime pay for some overtime hours worked than the penalty rate required by an award. Even though technically over-award payments, such as additional payments would not be OTE under subparagraph (a)(ii) of the definition of OTE in subsection 6(1).

Shift-loading

22. A shift loading is an amount paid to a worker in addition to his or her basic hourly rate for having to work outside the usual span of time for day workers. Shift-loadings payable on ordinary hours of work must be distinguished from overtime payments under awards and agreements. Often these are mutually exclusive under awards and agreements, but if an employee is entitled to a shift-loading in respect of hours other than ordinary hours of work, the Commissioner's view is that the specific inclusion of shift-loadings does not apply in that circumstance.

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

25. All amounts of earnings in respect of employment are in respect of the employee's ordinary hours of work unless they are remunerated for working overtime hours, or are otherwise referrable only to overtime or to other hours that are not ordinary hours of work. There is no such thing as earnings that are merely in respect of employment generally and are not OTE because they are not in respect of any particular hours of work.

26. An award or agreement may itself have a definition of 'ordinary time earnings' that purports to apply for superannuation purposes. However, the central question posed by the definition of OTE in the SGAA is what amounts are 'earnings in respect of ordinary hours of work'. This could in some cases a different amount from any purported amount of 'OTE' in the award or agreement. As mentioned in paragraph 13 of this ruling, the Commissioner accepts that 'ordinary hours of work' are as determined by the relevant award or agreement, but that does not imply that OTE itself is necessarily as determined by the award or agreement.

Paragraphs 27 to 40 of SGR 2009/2 identify certain specific payments that are OTE. These certain specific payments include allowances and loadings, bonuses, piece rates, paid leave and holiday pay, top-up payments, payments in lieu of notice, workers' compensation payments (where the employee is required to work) and directors fees.

Paragraph 27 of SGR 2009/2 relates to allowances and loadings and states:

27. Many employees receive various additional payments that are described as allowances or loadings and that are paid to employees to recognise or compensate for certain conditions relating to their employment. Examples:

· a 'site allowance' paid fortnightly at a flat rate in acknowledgement of the displacement an employee undergoes when a job requires him or her to work in a remote location;

· a 'casual loading' of 20% of the basic ordinary time rate of pay paid to a casual worker in lieu of any fixed, regular minimum hours of work and of paid leave entitlements;

· a 'dirt allowance' paid as a flat rate in acknowledgement of the conditions in which the work is undertaken; and

· a 'freezer allowance' paid at the rate of an extra $2.50 per hour to employees, such as some supermarket employees, who perform most of their duties in cold storage facilities.

· These kinds of payment are OTE except to the extent that they:

· are not 'salary or wages', for example if they are payments of a predetermined amount to offset or reimburse particular expenses…..

· relate solely to hours of work other than ordinary hours (see paragraphs 41 to 42 of this Ruling).

Paragraphs 32 to 36 of SGR 2009/2 relate to paid leave and holiday pay and state:

32. Subject to the exclusions mentioned at paragraph 34 of this Ruling, salary or wages that an employee receives, at or below his or her normal rate of pay for ordinary hours of work, in respect of paid leave is simply a continuation of his or her ordinary time pay. It is OTE. It does not matter whether the entitlement to take the paid leave accrued gradually over time, arose in a specified circumstance or following a specified event, or was simply granted to the employee in the exercise of the employer's discretion.

33. Similarly, salary or wages received at the ordinary time rate in respect of public holidays, rostered days off and the like is OTE.

34. However, payments made while a worker is on paid parental leave, or other kinds of ancillary leave are not OTE as these types of leave payments are excluded from being 'salary or wages' in the SGAA by Regulation 7AD of the Superannuation Guarantee (Administration) Regulations 1993 (SGAR)…….

35. The principle in paragraph 32 of this Ruling does not extend to extra payments by way of 'leave loadings', and like payments, that are demonstrably referrable to a notional loss of opportunity to work overtime, or similar.

36. Lump sum arrears payments of unused leave or salary or wages otherwise than on termination of employment are also OTE.

Paragraphs 41 to 46 of SGR 2009/2 relate to certain specific kinds of payments that are not OTE. These certain specific kinds of payments include overtime, on-call allowances and certain payments that are not salary or wages.

Paragraphs 41 to 43 of SGR 2009/2 relate to overtime and state:

41. Payments for work performed during hours outside an employee's ordinary hours of work are not OTE.

42. This is so whether the payments are calculated at an hourly rate or the employee gets a specific loading, or an annualised or lump sum component of a total salary package, that is expressly referrable to overtime hours or as remuneration for overtime hours worked.

43. However, some employees, particularly some managers and professionals, receive a single undissected annual salary within a remuneration package that recognises in a non-specific way that the employee may often be expected to work more than the ordinary hours of work prescribed. The whole amount of salary payable under such a package is OTE, unless overtime amounts are distinctly identifiable as mentioned in paragraph 42 of this Ruling.

Paragraph 46 of SGR 2009/2 relates to certain payments that are not salary and wages and states:

46. The following payments are not salary or wages for SGAA purpose and thus are not OTE:

· certain private or domestic payments….

· payments specifically excluded by the SGAA from being salary or wages for the purposes of calculating superannuation guarantee shortfalls….

· fringe benefits and other non-cash payments….

· some workers' compensation payments….

· expense allowance payments and reimbursement of expenses incurred for the employer….

· redundancy payments….

· payments for unfair dismissal….

Paragraph 58 of SGR 2009/2 relates to fringe benefits and other non-cash payments which are excluded from the definition of 'salary and wages'. Paragraph 58 states:

58. Fringe benefits as defined in the Fringe Benefits Tax Assessment Act 1986 (FBTAA) are excluded under subsection 11(3) of the SGAA. Additionally, the Commissioner takes the view that other 'benefits', within the meaning of the FBTAA, given by employers to employees that are neither fringe benefits nor salary or wages within the meaning of that Act are not salary or wages for SGAA purposes……

Paragraph 65 of SGR 2009/2 provides that all allowances, except allowances form part of an employee's salary and wages. Paragraph 65 of SGR 2009/2 states:

65. For the purposes of the SGAA, all allowances, except expense allowances that are fringe benefits under the FBTAA, received by an employee, are included in 'salary and wages'……

Paragraph 72 of SGR 2009/2 relates to expense allowances and provides that these allowances do not form part of an employee's salary or wages. Paragraph 72 of SGR 2009/2 states:

72. Expense allowances, that is, those allowances paid to an employee with a reasonable expectation that the employee will fully expend the money in the course of providing services, are not 'salary or wages'.

Paragraphs 260 to 264 of SGR 2009/2 refer to judgements and comments made in respect of the meaning of allowances as follows:

260. In Mutual Acceptance, the High Court considered whether a fixed weekly payment to employees who used their own motor vehicles in the course of their duties was an 'allowance' and therefore 'wages' as defined in the then Commonwealth Pay-Roll Tax Assessment Act 1941-42. The payment represented partial compensation for the motor vehicle expenses likely to be incurred by those employees.

261. In discussing what may be considered as the ordinary meaning of an 'allowance' Latham CJ in Mutual Acceptance stated that an allowance paid as compensation for unusual conditions of services:

… represents higher wages paid on account of special conditions, and may fairly be described as part of wages in the ordinary sense (emphasis added).

262. Mutual Acceptance was relied upon in Road & Traffic Authority of NSW v. Federal Commissioner of Taxation where the employees received fare allowances under the relevant award for travel to and from work. They were paid regardless of whether or not the employee incurred the expenditure. The question for decision was whether the allowances were expense payment benefits subject to fringe benefits tax or were within the definition of 'salary or wages' in former subsection 221A(1) of the ITAA 1936.

263. Hill J considered the allowance as additional compensation to the employees for their services. There was no need that the remuneration relate to specific services rendered, as long as the payments in question were given as remuneration for services generally. The fare allowances had no relationship to the actual cost of travel incurred by the employees. Accordingly, they were not reimbursements. The fare allowances were held to be 'salary or wages'.

264. An allowance can also be paid to compensate for particular working conditions, for example height, dust or danger. These types of allowances are not expended in the course of the employee's work, but rather, are paid as compensation for the conditions applying to the job.

Application of the law to your circumstances

Question 1 - Base Hours (36 hours)

Summary

The Ordinary Hours of 7.2 hours per day (36 hours per week) defined in a clause of the Agreement do form part of the employees' OTE.

Detailed Reasoning

Under paragraph 13 of SGR 2009/2, an employee's ordinary hours of work are the hours specified as his or her ordinary hours of work under the relevant award or agreement.

As stated above paragraph 25 of SGR 2009/2 provides that earning in respect of ordinary hours of work means all earnings other than overtime.

As the Base Hours of 36 hours are the employees' ordinary hours of work, the earnings in respect of these hours do form part of the employees' OTE.

Paragraph 22 of SGR 2009/2 provides that where employees paid a shift loading in addition to their usual hourly rate, the shift loading payable on ordinary hours forms part of the employees OTE.

Therefore, the Night Shift Penalties paid to employees in respect of their 36 Ordinary Hours per week also form part of their OTE.

Question 2 - Base Hours accruing for RDOs

Summary

The Ordinary Hours of 0.8 hours per day (4 hours per week) contribution to RDOs defined in a clause of the Agreement do not form part of the employees' OTE.

Detailed Reasoning

Paragraph 12 of SGR 2009/2 provides that an employee's earnings for the purpose of defining OTE is the remuneration paid to the employee as a reward for their services. For superannuation guarantee purposes this means the employee's salary or wages.

Question 3 - RDOs paid in rest and recreation (R&R) week or on termination of employment

Summary

RDOs paid during R&R week or on termination of employment under a clause of the Agreement do form part of the employees OTE.

Detailed Reasoning

Paragraphs 32 and 33 of SGR 2009/2 relate to paid leave and holiday pay. Paragraph 32 provides that salary or wages paid to an employee in respect of periods of paid leave is simply a continuation of his or her ordinary time pay and does form part of OTE. Similarly, paragraph 33 of SGR 2009/2 explains that salary or wages received at the ordinary time rate in respect of public holidays, rostered days and the like is OTE.

As the employees receive RDOs at their ordinary time rate, this payment does form part of the employees' OTE.

Question 4 - Overtime

Summary

Overtime paid under a clause of the Agreement does not form part of the employees' OTE.

Detailed Reasoning

Under paragraph 25 of SGR 2009/2 all earnings in respect of employment are in respect of the employee's ordinary hours of work unless they are remunerated for working overtime hours, or are referrable only to overtime or to other hours that are not ordinary hours of work.

As noted above paragraphs 41 and 42 of SGR 2009/2 relate to overtime payments.

As the earnings in respect of overtime are performed for work during hours that are outside of the employees' ordinary hours of work, these earnings do not form part of the employees OTE.

Question 5 - Crib Break during overtime

Summary

The 30 minute break paid under a clause of the Agreement does not form part of the employees OTE.

Detailed Reasoning

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.

The payment in respect of the additional crib break is attributable to overtime hours and does not form part of the employees OTE.

Question 6 - Allowances

Summary

The following allowances defined in a clause of the Agreement form part of the employees OTE:

· All Purpose Allowance

· Flat Allowance - Daily Travel Allowance

· Flat Allowance -Supplementary Travel Allowance

· Flat Allowance - First Aid Allowance

· The Flat Allowance - Meal Allowance defined in a clause of the Agreement does not form part of the employees OTE.

Detailed Reasoning

All Purpose Allowance

SGR 2009/2 provides that certain specific kinds of payments form part of an employee's OTE. Under paragraph 27 of SGR 2009/2 allowances and loadings are one of these specific kinds of payment.

The All Purpose Allowance is not a payment that is provided to offset or reimburse a particular expense and is not paid in relation to hours of work other than ordinary hours, and thereby is not excepted from forming part of the employees OTE as described above.

Therefore, the All Purpose Allowance does form part of the employees OTE.

Flat Allowances

Under a clause of the Agreement, employees are paid various Flat Allowances as separate stand alone payments in addition to their Base Hourly Rate. The flat allowances do not form part of the Base Hourly Rate for the purpose of calculating overtime or paid leave.

Travel Allowance

Under a clause of the Agreement, employees are paid a flat daily travel allowance, with local employees also receiving a supplementary travel allowance.

Paragraph 27 of SGR 2009/2 provides that additional payments that are described as allowances that are paid to compensate employees for certain conditions relating to their employment do form part of OTE, except in cases where the payment relates solely to hours of work other than other ordinary hours of work.

On the other hand, paragraph 73 of SGR 2009/2 states that a reimbursement that compensates an employee for an expense they have incurred on behalf of the employer is not 'salary or wages', and as such cannot form part of OTE.

In summary both the travel allowances are paid to compensate employees for conditions relating to their employment. The allowances paid from Monday to Friday inclusive do not relate solely to hours of work other than ordinary hours of work, the payments do not reconcile with employee travel expenses, and the employee is not required to provide evidence of travel expenses incurred.

Therefore, the daily travel allowance and the supplementary travel allowance do form part of the employee's OTE when the allowances are paid in respect of the ordinary hours worked from Monday to Friday.

Ordinary hours do not extend to Saturdays and Sundays and as such the travel allowances paid in respect of these hours do relate solely to hours of work other than other ordinary hours of work. Consequently, the allowances paid on Saturdays and Sundays do not form part of the employee's OTE.

Meal Allowance

A clause of the Agreement provides that employees who are not supplied board and lodgings by the employer will receive a meal allowance where they are required to work two hours or more overtime outside the ordinary working hours, Monday to Friday or more than 8 hours overtime on either a Saturday or Sunday. The meal allowance is paid if the employee has not received prior notice of this from at least the previous day.

Paragraph 27 of SGR 2009/2 provides that additional payments that are described as allowances that are paid to compensate employees for certain conditions relating to their employment form part of OTE except in cases where the payment relates solely to hours of work other than other ordinary hours of work.

As the meal allowance is provided after employees have worked a specific amount of overtime, the meal allowance is not paid in respect of the employees ordinary hours of work.

Therefore, the meal allowance does not form part of the employees OTE.

First Aid Allowance

Under a clause of the Agreement, employees who are appointed as a first aid attendant by the employer will receive weekly First Aid Allowance. The First Aid Allowance is an allowance to compensate appointed employees for this condition of their employment.

Paragraph 27 of SGR 2009/2 provides that additional payments that are described as allowances that are paid to compensate employees for certain conditions relating to their employment do form part of OTE.

Therefore, the First Aid Allowance does form part of the employees OTE.

Question 7 - Rest and Recreation (R&R) travel payments

Paragraph 27 of SGR 2009/2 provides that many employees receive additional payments that are described as allowances or loadings and are paid to employees to recognise or compensate for certain conditions relating to their employment.

Appendix 2 - Explanation to SGR 2009/2 is provided as information to help understand how the Commissioner's view has been reached. In respect of allowances paragraph 264 states:

264. An allowance can also be paid to compensate for particular working conditions, for example height, dust or danger. These types of allowances are not expended in the course of the employee's work, but rather, are paid as compensation for the conditions applying to the job.

Paragraphs 260 to 263 of SGR 2009/2 refer to fare allowances for travel to and from work in circumstances where the allowances were paid regardless of whether the employee incurred the expenditure.

As the R&R travel payments, under a clause of the Agreement, are not expended in the course of the employee's work, and are based on neither actual nor incurred expenditure, they are considered to be an allowance and therefore they do form part of the employee's OTE.

Question 8 - Locality Allowance

Summary

The locality allowance paid under a clause of the Agreement forms part of the employees OTE in respect of the accrual relating to their Ordinary Hours of work.

The locality allowance paid under a clause of the Agreement does not form part of the employees OTE in respect of the accrual relating to their overtime hours.

Detailed Reasoning

Paragraph 25 of SGR 2009/2 provides that only the earnings in respect of the employee's ordinary hours of work form part of their OTE.

Paragraphs 41 and 42 of SGR 2009/2 provides that payments for work performed during hours outside an employee's ordinary hours of work are not OTE.

The locality allowance accrues for both the employees' ordinary hours of work and also the overtime hours.

Paragraph 25 of SGR 2009/2 provides that the earnings in respect of the employees' ordinary hours of work form part of their OTE.

Paragraph 41 and 42 of SGR 2009/2 provides that earnings in respect of work performed outside the employees ordinary hours of work are not OTE. As such the locality allowance accrued in relation to overtime hours does not form part of OTE.

Therefore, the locality allowance that accrues in respect of the employees 36 ordinary hours of work does form part of their OTE when the allowance is paid to the employees on taking R&R leave.

Question 9 - Living Away From Home Allowance

Summary

The LAFHA paid to the employees under a clause of the Agreement does not form part of the employees OTE.

Detailed Reasoning

Miscellaneous Taxation Ruling MT 2030 Fringe Benefits: Living-away-from-home allowance benefits explains that a LAFHA exists where it is reasonable to conclude from the circumstances that some or all of the allowance is in the nature of compensation to the employee for additional expenses incurred and/or other disadvantages suffered, because the employee is required to live away from his or her usual place of residence in order to perform the duties of their employment.

The LAFHA is paid to compensate the Employee for expenses incurred whilst they are living away from their usual place of residence in order to perform their employment-related duties and therefore would constitute a fringe benefit under the Fringe Benefits Tax Assessment Act 1986.

Under paragraphs 46 and 58 of SGR 2009/2 fringe benefits are not salary or wages for SGAA purposes and thus are not OTE.

Question 10 - Mobilisation and demobilisation

Summary

The Mobilisation and demobilisation payment as defined in a clause of the Agreement does form part of the employee's OTE.

Application of the law to your circumstances

Paragraph 27 of SGR 2009/2 provides that many employees receive additional payments that are described as allowances or loadings and are paid to employees to recognise or compensate for certain conditions relating to their employment.

Appendix 2 - Explanation to SGR 2009/2 is provided as information to help understand how the Commissioner's view has been reached. In respect of allowances paragraph 264 states:

264. An allowance can also be paid to compensate for particular working conditions, for example height, dust or danger. These types of allowances are not expended in the course of the employee's work, but rather, are paid as compensation for the conditions applying to the job.

As the mobilisation and demobilisation payment is paid to compensate the non-local employees for the time taken for travel between their 'Usual Place of Residence' and the workplace upon commencement and conclusion of employment, this payment is considered to be an allowance and therefore does form part of the employee's OTE.

Overall conclusion

Provided below is a table setting out which components of the employees salary or wage as provided in the Agreement forms part of OTE.