Edited version of your written advice

Authorisation Number: 1012860452695

Date of advice: 25 August 2015

Advice

Subject: Superannuation guarantee obligations

Question

Will a non-resident employer have a superannuation guarantee shortfall, as defined under subsection 19(1) of the Superannuation Guarantee (Administration) Act 1992 (SGAA), for their employee, if they have not made adequate contributions as detailed under subsection 23(2) of the SGAA?

Answer

Yes. Refer to 'why we have made this decision'

This advice applies for the following period

Financial year ended 30 June 2015

The arrangement commences on

1 July 2014

Relevant facts and circumstances

In your letter, you requested a private ruling as to whether you were obliged to make superannuation guarantee contributions for your employee, while she/he was temporarily working in Australia. You provided the following relevant facts:

• Your employee entered Australia on a business visitor subclass 400 visa

• You continued to contribute to a pension fund on behalf of your employee while he/she was temporarily performing work in Australia

• both you and your employee are not Australian residents for tax purposes

Assumptions

We have assumed that your employee was paid salary or wages (s/w) of $450 or more in a month, in respect of the work performed in Australia.

Relevant legislative provisions and ATO views

Superannuation Guarantee (Administration) Act 1992 section 12

Superannuation Guarantee (Administration) Act 1992 subsection 19(1)

Superannuation Guarantee (Administration) Act 1992 subsection 23(2)

Superannuation Guarantee (Administration) Act 1992 paragraph 27(1)(d)

Superannuation Guarantee (Administration) Act 1992 subsection 27(2)

Superannuation Guarantee (Administration) Act 1992 paragraph 27(1)(e)

Superannuation Industry (Supervision) Regulations 1994 regulation 7

Superannuation Industry (Supervision) Regulations 1994 regulation 7AC

Superannuation Industry (Supervision) Regulations 1994 regulation 7AD

Reasons for decision

Why we have made this decision

Summary

You will have a superannuation guarantee shortfall, as defined under subsection 19(1) of the Superannuation Guarantee Administration Act 1992 (SGAA), for your employee, if you have not made adequate contributions as detailed under subsection 23(2) of the SGAA.

Detailed reasoning

Subsection 19(1) of the SGAA provides the formula, inclusive of a charge percentage currently set at 9.5%, for an employer to determine shortfalls for individual employees. The formula under subsection 23(2) of the SGAA allows an employer to reduce the charge percentage on the basis of contributions made, such that an employer's shortfall for an employee may be reduced to nil.

The SGAA requires that an employer must provide the required minimum level of superannuation support for its employees (unless the employees are exempt employees) or pay the superannuation guarantee charge (SGC).

Firstly, we will address the question of whether an employer/employee relationship exists and there is a consequent need for superannuation support, and secondly, consider if any exemptions or exclusions apply that remove the need for that support.

Employer and employee

Under section 12 of the SGAA employees and employers have their ordinary meaning.

Superannuation Guarantee Ruling SGR 2005/1 - Superannuation guarantee: who is an employee? (SGR 2005/1) explains when an individual is considered to be an 'employee' under section 12 of the SGAA. Paragraph 9 of SGR 2005/1 indicates that whether a person is an employee of another is a question of fact, and it is the totality of the relationship between the parties which must be considered.

You have provided no evidence to suggest that the working relationship between you and your employee, was anything other than a normal employer/employee relationship. That relationship did not change in any material way while work was being performed in Australia.

Section12 of the SGAA provides for employee exceptions; however they are not relevant to this employee.

As such the employer and employee requirements, as defined under section 12 of the SGAA are satisfied.

Salary and wages exclusions

Section 27 of the SGAA details salary or wages (s/w) which are not taken into account for determining an employer's individual SG shortfalls. Relevant exclusions relate to prescribed s/w and employees under paragraphs 27(1) (d) and (e) of the SGAA. The associated regulations in the Superannuation Industry (Supervision) Regulations 1994 (SISR) are discussed as follows:

Regulation 7 - under this regulation, employees will be prescribed employees if they hold particular visa or entry permits. Your employee entered Australia on a subclass 400 temporary work (short stay activity) visa, which under this regulation is not included as a visa, the holder of which will be a prescribed employee.

Regulation 7AC - this regulation provides that s/w are prescribed if a scheduled international social security agreement indicates that the employer to which the s/w relate is not subject to the SGAA, in relation to the work for which the s/w were paid. Such an agreement exists, however the scope under schedule 1, article 2 of the agreement does not cover superannuation law.

Regulation 7AD - this regulation relates to s/w prescribed on the basis of being payments made in a range of situations inclusive of parental leave. The range has no relevance to the s/w paid to your employee.

Subsection 27(2) of the SGAA provides that if an employee is paid s/w of less than $450 in a calendar month then those s/w are not to be taken into account for the purpose of making a calculation under section 19 of the SGAA. Based on our assumption above that your employee was paid $450 or more in a calendar month, this s/w exclusion will not apply.

In effect, there are no exemptions or exclusions which reduce the s/w taken into account for determining your individual SG shortfalls.

Conclusion

An employer/employee relationship existed.

You had an obligation under the SGAA to provide superannuation support to your employee while he/she was temporarily working in Australia.. The s/w paid to your employee did not fall under any exclusions and were to be included to determine shortfalls for individual employees under section 19 of the SGAA.

You would have a superannuation guarantee shortfall in respect of your employee, if you have not made adequate contributions under subsection 23(2) of the SGAA.

We followed these ATO view documents

Superannuation Guarantee Ruling SGR 2005/1 Superannuation guarantee: who is an employee?