ATO ID 2015/24: Superannuation guarantee: work done outside Australia
Date of decision: 29 July 2015
Year of income: For the financial year ending 30 June 2016 and later years
Business line: Superannuation

Issue
Is work done at sea at a location which satisfies all of the following: 'work done outside Australia' for the purpose of subsection 27(1) of the Superannuation Guarantee (Administration) Act 1992 (SGAA)?

Decision
Yes. Work done at sea at such a location is 'work done outside Australia' for the purpose of subsection 27(1) of the SGAA.

Facts
The employee is not a resident of Australia. The employee is employed by a company which is not a resident of Australia. The employee's work is done at sea more than 12 nautical miles from the territorial sea baseline of Australia. The employee's work is done at sea more than 12 nautical miles from the territorial sea baseline of following Territories: The employee's work is not done in the JPDA or an offshore area for the purpose of the Offshore Petroleum and Greenhouse Gas Storage Act 2006. The salary or wages paid to the employee do not relate to employment covered by a certificate under section 15C of the SGAA (concerning International Social Security Agreements).

Reasons for decision
Summary: Subsection 27(1) of the SGAA provides that certain salary or wages are not to be taken into account for the purpose of making a calculation under section 19 of the SGAA (concerning individual superannuation guarantee shortfalls). The expression 'work done outside Australia' is used in paragraphs 27(1)(b) and 27(1)(c) of the SGAA. Paragraph 27(1)(b) of the SGAA relevantly refers to: (b) salary or wages paid to 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) | Detailed Reasoning - What constitutes 'Australia' in the relevant context?: Under section 4 of the SGAA the application of that Act extends to every external Territory referred to in the definition of Australia. Australia, when used in a geographical sense, is defined in section 6(1) of the SGAA, as having the same meaning as in the Income Tax Assessment Act 1997 (ITAA 1997). The ITAA 1997, in section 960-505 defines Australia as: Territories (1) Australia, when used in a geographical sense, includes each of the following: (a) Norfolk Island; (b) the Coral Sea Islands Territory; (c) the Territory of Ashmore and Cartier Islands; (d) the Territory of Christmas Island; (e) the Territory of Cocos (Keeling) Islands; (f) the Territory of Heard Island and the McDonald Islands. A note to the above definition in section 960-505 of the ITAA 1997 refers the reader to section 15B of the Acts Interpretation Act 1901 (AIA). Subsection 15B(1) of the AIA provides: An Act is taken to have effect in, and in relation to, the coastal sea of Australia as if that coastal sea were part of Australia. Subsection 15B(2) of the AIA provides: A reference in an Act to Australia, or to the Commonwealth, is taken to include a reference to the coastal sea of Australia. Subsection 15B(3) of the AIA provides: An Act that is in force in an external Territory is taken to have effect in, and in relation to, the coastal sea of the Territory as if that coastal sea were part of the Territory. Subsection 15B(3A) of the AIA provides: A reference in an Act to all or any of the external Territories (whether or not one or more particular Territories are referred to) is taken to include a reference to the coastal sea of any Territory to which the reference relates. Accordingly, 'Australia' in the phrase 'work done outside Australia' as used in subsection 27(1) of the SGAA includes the coastal sea of Australia and the coastal sea of each of its Territories. Note that prior to 1 July 2016, the SGAA included sub-paragraphs 27(1)(b)(ii) and 27(1)(c)(ii) of the SGAA, which stated that when the work done in Norfolk Island is undertaken by an employee who is a resident of Norfolk Island or for an employer who is a resident of Norfolk Island, superannuation guarantee obligations will not apply in respect of salary or wages paid to the employee for that work. [1] | Detailed Reasoning - Meaning of 'coastal sea': Paragraph 15B(4)(a) of the AIA provides that, in section 15B, 'coastal sea' in relation to Australia, means: and includes the airspace over, and the sea-bed and subsoil beneath, any such sea. Similarly, paragraph 15B(4)(b) of the AIA provides that, in section 15B, 'coastal sea' in relation to an external Territory, means: and includes the airspace over, and the sea-bed and subsoil beneath, any such sea. Section 2B of the AIA defines 'territorial sea' as having the same meaning as in the Seas and Submerged Lands Act 1973 (SSLA). Subsection 3(1) of the SSLA, in part, defines 'territorial sea' as having the same meaning as in Articles 3 and 4 of the United Nations Convention on the Law of the Sea held at Montego Bay on 10 December 1982 (the Convention). Articles 3 and 4 of Section 2 of Part II of the Convention (as contained in the Schedule to the SSLA) read respectively: Breadth of the territorial sea Every State has the right to establish the breadth of its territorial sea up to a limit not exceeding 12 nautical miles, measured from baselines determined in accordance with this Convention. Outer limit of the territorial sea The outer limit of the territorial sea is the line every point of which is at a distance from the nearest point of the baseline equal to the breadth of the territorial sea. Consistent with the right set out in Article 3, and pursuant to a power to do so set out in section 7 of the SSLA, the Governor-General made a proclamation declaring the outer limit of the territorial sea to be 12 nautical miles seaward of that territorial sea baseline (see Proclamation in Gazette No. S 297, Tuesday 13 November 1990). In some cases, the outer limit of the territorial sea is less than 12 nautical miles from the territorial sea baseline, due to the close proximity of two countries e.g. Australia and Papua New Guinea (Australian Treaty Series 1985 No 4 - Treaty between Australia and the Independent State of Papua New Guinea concerning Sovereignty and Maritime Boundaries in the area between the two Countries, including the area known as Torres Strait, and Related Matters). | Detailed Reasoning - Offshore areas: The extension of the definition of Australia in subsection 960-505(2) of the ITAA 1997, to the offshore areas of the JPDA and the offshore area for the purposes of the Offshore Petroleum and Greenhouse Gas Storage Act 2006 provides that the SGAA has effect as if these offshore areas were part of Australia. A note to the definition in section 960-505(2) indicates that the offshore areas include all things located in those areas, including all installations and structures such as oil and gas rigs. These areas also extend to the airspace over, and the sea-bed and subsoil beneath those areas. A further note to section 950-505(2), makes it clear that the offshore area and the JPDA include the exclusive economic zone (EEZ) and the continental shelf of Australia (continental shelf). The SSLA defines the terms 'exclusive economic zone' and 'continental shelf' as having the same meaning as the relevant provisions of the Convention. The outer limit of the EEZ is 200 nautical miles seaward of that of the territorial sea baselines (see Proclamation in Gazette No. S 290, Friday 29 July 1994). The continental shelf is largely coextensive with the EEZ although the continental shelf extends beyond 200 nautical miles in some areas. The outer limits of both the EEZ and continental shelf are less than 200 nautical miles in some areas (for example between Australia and Papua New Guinea where they are limited by treaty). Paragraph 27(1)(ca) of the SGAA also states that when the work in the JPDA is undertaken by an employee who is not an Australian resident, superannuation guarantee obligations will not apply in respect of salary or wages paid to the employee for that work. | Detailed Reasoning - Conclusion: In the phrase 'work done outside Australia' as used in subsection 27(1) of the SGAA, 'Australia' is used in a geographical sense and extends to the outer limits of Australia's 'coastal sea'. Further, 'Australia' in that phrase also includes the territories of Norfolk Island, the Coral Sea Territory, the Territory of Ashmore and Cartier Islands, the Territory of Cocos (Keeling) Islands, the Territory of Christmas Island, the Territory of Heard Island and the McDonald Islands and the 'coastal sea' of each of those Territories. It also includes the offshore areas. Work done outside those areas is 'work done outside of Australia' for the purposes of subsection 27(1) of the SGAA. As a result, the salary or wages paid to the employee in this case is for 'work done outside of Australia' and so are not taken into account for the purpose of making a calculation under section 19 of the SGAA, due to the operation of paragraph 27(1)(b) of the SGAA.

Legislative references: Superannuation Guarantee (Administration) Act 1992 section 4 section 6 section 15C section 19 section 27 subsection 27(1) paragraph 27(1)(b) paragraph 27(1)(c) paragraph 27(1)(ca)
Related public rulings and determinations: Superannuation Guarantee Ruling SGR 2009/2
Related ATO interpretative decisions: ATO ID 2003/907 | ATO ID 2010/46
Other references: Explanatory Memorandum to the Petroleum (Timor Sea Treaty) (Consequential Amendments) Bill 2003 United Nations Convention on the Law of the Sea (Montego Bay, 10 December 1982) Australian Treaty Series 1985 No 4 - Treaty between Australia and the Independent State of Papua New Guinea concerning Sovereignty and Maritime Boundaries in the area between the two Countries, including the area known as Torres Strait, and Related Matters Proclamation in Gazette No. S 297, Tuesday 13 November 1990 - outer limit of territorial sea Proclamation in Gazette No. S 290, Friday 29 July 1994 - outer limit of exclusive economic zone
Subject references: Australian offshore areas Superannuation guarantee charge Superannuation guarantee scheme