Edited version of private advice

Authorisation Number: 1052129076848

Date of advice: 20 November 2023

Ruling

Subject: Superannuation guarantee - honorariums

Question

Is the entity required to pay SG for honorarium payments made to members of a Human Research Ethics Committee (HREC) due to them being considered employees under the extended definition in subsection 12(9) of the Superannuation Guarantee (Administration) Act 1992 (SGAA)?

Answer

Yes.

This advice applies for the following periods:

quarters commencing on 1 July 2023 and ending on 30 June 2024

The scheme commenced on:

1 July 2023

Relevant facts and circumstances

The entity provided the terms and conditions under which the HREC is being selected, engaged, and paid.

Relevant legislative provisions

Taxation Administration Act 1953 Section 12-45 of Schedule 1

Taxation Administration Act 1953 Paragraph 12-45(1)(d) of Schedule 1

Superannuation Guarantee (Administration) Act 1992 Paragraph 11(1)(e)

Superannuation Guarantee (Administration) Act 1992 Section 12(1)

Superannuation Guarantee (Administration) Act 1992 Section 12(9)

Superannuation Guarantee (Administration) Act 1992 Paragraph 12(9)(b)

Reasons for decision

Summary

The provided information supports that the current payments referred to by the entity as honorarium payments are not true honorarium payments for filling an office, but are rather renumeration paid to an office holder as ordinary salary for performing the duties of the office.

While ordinarily the members of the HREC receiving honorariums would not be considered common law employees of the entity under section 12(1) of the SGAA, they are considered to be office holders as covered by the extended definitions in section 12(9) of the SGAA.

Consequently, the entity is subject to SG requirements for its HREC members' honorarium payments.

The entity would have no SG obligation for the salary and wages prior to 1 July 2022, where the total payment per calendar month was below the $450 threshold under subsection 27(2) of the SGAA. The $450 threshold was removed as of 1 July 2022, requiring the entity to pay SG contributions on all salary and wages paid to members of the HREC from this date on.

Detailed reasoning

Subsection 12(1) of the SGAA provides that:

(1) Subject to this section, in this Act, employee and employer have their ordinary meaning. However, for the purposes of this Act, subsections (2) to (11):

(a) expand the meaning of those terms; and

(b) make particular provision to avoid doubt as to the status of certain persons.

Paragraph 12(9)(b) of the SGAA further clarifies that:

A person who:

(a)  ...

(b)  is otherwise in the service of the Commonwealth, of a State or of a Territory...

is an employee of the Commonwealth, the State or the Territory, as the case requires. However, this rule does not apply to a person in the capacity of the holder of an office as a member of a local government council.

In this case, the members of the HREC receiving honorariums would not be considered common law employees of the entity so we need to consider if they are covered by the extended definition under paragraph 12(9)(b) of the SGAA.

Superannuation Guarantee Ruling SGR 2005/1 Superannuation guarantee: who is an employee (SGR 2005/1) states at paragraph 90 that the wording in subsection 12(9) of the SGAA is very similar to the wording contained in paragraphs 12-45(1)(b), (c) and (d) in Schedule 1 to the Taxation Administration Act 1953 (TAA).

Therefore, the interpretation used in Taxation Ruling TR 2002/21 Income tax: Pay As You Go (PAYG) Withholding from salary, wages, commissions, bonuses or allowances paid to office holders (TR 2002/21) can be applied in interpreting the application of section 12(9) of the SGAA.

TR 2002/21 provides guidance on payments to office holders:

Paragraph 17 of TR 2002/21 states that:

The common law has identified two types of individuals in the service of the Crown:

•                 office holders; and,

•                 common law employees of the Crown.

Paragraph 19 of TR 2002/21 states

19. A common law office holder would come within paragraph 12-45(1)(d) in Schedule 1 to the TAA where the office has the characteristics mentioned in paragraph 15 of this Ruling and is not an office under the Constitution or an Australian law. That is, there needs to be an existence independent of the office, and the duties or functions should be attached to the office rather than to the individual. The relationship created with the office holder should be with the Crown itself and not with the person who brought the office into existence by the exercise of a general law or a statutory power.

Paragraph 15 of TR 2002/21 states:

... the appointment, office or position must also exhibit the following characteristics of an office holder:

•                 Independent existence: The office must exist regardless of the individual who occupies the office from time to time - that is, if the individual currently occupying the office vacates that office, the office must continue to exist to be filled by another individual;

•                 Duties, functions, responsibilities or powers: The office must have identifiable duties, functions, responsibilities or powers other than a mere advisory function. These features of the office (or of the panel, board, committee or tribunal to which the individual has been appointed) would usually be specified in the relevant legislation or statutory instrument; and

•                 The relevant duties, functions, responsibilities or powers must attach to the office itself, rather than the individual who occupies the office.

The HREC is not set up under Australian law so it must be determined if the positions within have the characteristics of an office holder under paragraph 15 of TR 2002/21. The provided information shows the HREC has an independent existence, if a person vacates their position the position will be filled by someone else.

The HREC has identifiable duties and does not just have an advisory function. It is there to review research applications and follows the National Statement on Ethical Conduct in Human Research 2023. Its function attaches to the committee itself and not just to the individual in the office.

Additionally, the minimum requirements for HREC under the National Statement from 1 January 2024 show the community representatives are a requirement across the board for HRECs. The ToR also states there must be 3 members not employed by ACTHD or Canberra Health Services at each meeting so these members are required to participate, even if they can't attend each meeting. Therefore, the extended definitions under the TAA apply to the HREC members receiving honorariums.

The meanings of 'salary', 'wages', 'commission', 'bonuses' and 'allowances', in respect of individuals covered by section 12-45 of Schedule 1 to the TAA, are discussed at paragraphs 27-29 of TR 2002/21.

Paragraph 27 of the ruling provides that the terms carry their ordinary meaning.

Paragraph 28 states that an office holder's remuneration is considered salary,

Paragraph 29 provides that remuneration paid to an office holder is considered ordinary salary for performing the duties of that office.

Paragraph 11(1)(e) of the SGAA states salary and wages includes remuneration of a person referred to in subsection 12(9) of the SGAA.

As such, the honorariums would be subject to SG requirements.

The entity would have no SG obligation for the salary and wages prior to 1 July 2022, where the total payment per calendar month was below the $450 threshold under subsection 27(2) of the SGAA. The $450 threshold was removed as of 1 July 2022, requiring the entity to pay SG contributions on all salary and wages paid to members of the HREC from this date on.