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Edited version of your written advice
Authorisation Number: 1051442339401
Date of advice: 23 October 2018
Ruling
Subject: Superannuation guarantee and ordinary time earnings
Question
Is the Mobile Phone and Motor Vehicle Allowance (the Allowance) paid by an employer (Your Client) to certain employees (the Employees) ordinary time earnings (OTE) as defined in subsection 6(1) of the Superannuation Guarantee (Administration) Act 1992 (SGAA)?
Answer
No
This advice applies for the following periods:
Income year ending 30 June 2019
The arrangement commences on:
1 July 2018
Relevant facts and circumstances
Your Client employs the Employees to sell its products.
The terms of the Employees’ employment with Your Client are set out in the Contract of Employment (the Contract) which provides that:
● Employees are required to use their private motor vehicle and mobile phone for work purposes.
● Conditional upon maintaining a valid driving license and a suitable vehicle, the Employees are entitled to receive a pre-determined Mobile Phone and Motor Vehicle Allowance (the Allowance).
● It is a condition of the Allowance that the Employees ensure that their motor vehicle is neat and clean at all times, and maintained in a state of good mechanical order. They must also ensure that their mobile phone is maintained and operable at all times.
● The Allowance is not payable where the Employees take leave without pay, or for any period in which they do not have a suitable motor vehicle available for work-related use.
The set rate of the Allowance has been determined in accordance with the Commercial Sales Award 2010.
The estimated work use kilometres are based on historical average annual kilometres.
The estimated work use kilometres calculation only includes kilometres travelled between the first sales appointment to another sales appointment, or to Your Client’s office. It does not include the kilometres travelled between home to the sales appointment or vice versa.
The Employees are expected to fully expend the Allowance.
Relevant legislative provisions
Superannuation Guarantee (Administration) Act 1992 subsection 6(1)
Reasons for decision
Summary
The Allowance is not OTE of the Employees for the purposes of subsection 6(1) of the SGAA.
Detailed reasoning
Ordinary time earnings, in relation to an employee, is defined in subsection 6(1) of the SGAA as:
(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 their employment:
(A) a payment in lieu of unused sick leave;
(B) an unused annual leave payment, or unused long service leave payment, within the meaning of the Income Tax Assessment Act 1997; and
(ii) earnings consisting of over-award payments, 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.
The Commissioner’s view on OTE, as defined in subsection 6(1) of the SGAA, is set out in Superannuation Guarantee Ruling SGR 2009/2 Superannuation guarantee: meaning of the terms 'ordinary time earnings' and 'salary or wages'. Generally, 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'.
At paragraph 27 of SGR 2009/2, the Commissioner discusses ‘Allowances and loadings’ specifically and states that certain 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, 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 (see paragraph 72 of this Ruling); or
● relate solely to hours of work other than ordinary hours of work (see paragraphs 41 to 43 of this Ruling).
At paragraphs 65 and 72 of SGR 2009/2, the Commissioner states:
65. For the purposes of the SGAA, all allowances, except expense allowances and allowances that are fringe benefits under the FBTAA, received by an employee, are included in 'salary or wages'. Expense allowances are dealt with under paragraph 72 of this Ruling.
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'.
In this case, the Allowance is paid to the Employees with the expectation that it would be fully expended in providing services to Your Client. The Allowance is not paid to compensate the Employees for a particular condition of employment. Therefore, the Allowance is not salary or wages, and is not OTE for SGAA purposes.