Edited version of your written advice

Authorisation Number: 1012714406774

Subject: Superannuation Guarantee for non-resident employees working both inside and outside of Australia for a non-resident employer.

Question

Is there an obligation for a non-resident employer to provide superannuation guarantee (SG) support for non-resident employees who perform services both inside and outside of Australia?

Advice

Yes. Refer to 'Reasons for decision'

The arrangement commences on:

After 1 July 2014

Relevant facts and circumstances

• The employer is based in an overseas country. The employer's commercial operations are principally run out of that country and all contracts and agreements are entered into by the employer in that location.

• The request relates solely to non-resident employees.

• These employees carry out the larger proportion of their work outside of Australia and the balance within Australia.

• These employees are paid a superannuation equivalent into an overseas pension fund.

• The salary or wages paid to the employees do not relate to employment covered by a certificate under section 15C of the Superannuation Guarantee (Administration) Act 1992 (SGAA) (concerning International Social Security Agreements).

• These employees work on a rotational basis, 5 weeks on and 5 weeks off. They return to their overseas home locations on 'off' periods.

• The contract of employment with the employee states:

• the workers employment is not subject to a maximum daily number of working hours, but it does respect the rest hour regulations in force at any time.

• The contract for employment sets a fixed monthly salary which is paid during work periods and during leave. In the course of a year, the employee receives one calendar day of leave for every calendar day of work.

Relevant legislative provisions

Superannuation Guarantee (Administration) Act 1992 Section 27

Reasons for decision

Generally, an employer is liable to pay superannuation to eligible employees, where that employment is undertaken in Australia. An individual's superannuation obligation is calculated by applying the percentage rate (currently 9.5%) to the total ordinary time earnings (OTE) paid by the employer to the employee for the quarter. This is in accordance with Part 3 of the SGAA and subject to certain exclusions.

The general exclusions of salary or wages for the purposes of calculating the SG shortfall are contained in subsection 27(1) of the SGAA.

Specifically, subparagraph 27(1)(b) of the SGAA advises that salary or wages are not to be taken into account for:

….'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'

There is no exclusion that applies to payment of salary and wages paid by a non-resident employer to a non-resident employee for work done in Australia.

How the law applies to your circumstances

The Commissioner considers that there are no SG obligations in respect of a non-resident employee working outside of Australia. However, there is a SG obligation in respect of a non- resident employee who is working within Australia.

The employer employs workers who are not residents of Australia. The employees are paid a monthly salary.

The standard contract between the employer and the employees regarding service and leave stipulates that:

• an employee will work for 182.5 calendar days out of a calendar year

• the employee will earn 1 calendar day of leave, per day of service.

The implication in subsection 27(1)(b) of the SGAA requires that superannuation is payable on the salary or wages paid to a non-resident employee for work done within Australia.

There will be no obligation to pay SG to non-resident employees while the employee is working outside of Australia.

However, once the employee is inside of Australia SG will be payable.

The employer is therefore required to record the time the employees are within Australia and pay SG on this portion of their salary. Salary and wages paid to a non-resident employee are not subject to SG while the employee is outside of Australia.