ATO ID 2006/321: Superannuation Guarantee Charge (SGC): two employment contracts
Date of decision: 10 November 2006
Year of income: 30 June 2006
Business line: Superannuation

Issue
Where there are two contracts of employment which exist simultaneously between an employer and an employee, will the employer have an obligation under each contract to make sufficient superannuation contributions to avoid a liability to the superannuation guarantee charge (SGC) in respect of the employee under the Superannuation Guarantee (Administration) Act 1992 (SGAA)?

Decision
Yes, where there are two contracts of employment which exist simultaneously between an employer and an employee, the employer will have an obligation under each contract to make sufficient superannuation contributions to avoid a liability to the SGC in respect of the employee under the SGAA. If the employer makes sufficient superannuation contributions to reduce the employer's charge percentage to nil under one contract but fails to make sufficient contributions to reduce their charge percentage to nil under the other contract, the employer will have a liability to the SGC.

Facts
The taxpayer was employed as a part-time administrative assistant with the employer. A contract of employment governed this engagement. During the taxpayer's period of employment with the employer as a part-time administrative assistant, the taxpayer was also engaged as a casual teacher with the employer. A separate contract of employment governed this engagement. Two different certified agreements applied at various stages of the taxpayer's employment in the part-time administrative position. A certified agreement also applied to the taxpayer in the casual teaching position. This agreement was different to the certified agreements which applied to the taxpayer's employment as a part-time administrative assistant. In relation to the taxpayer's employment as a part-time administrative assistant with the employer, the relevant state law required the employer to make superannuation contributions to a defined benefit superannuation scheme. The employer obtained the requisite benefit certificate under section 22 of the SGAA in relation to the defined benefit superannuation scheme for the quarters in question. In relation to the taxpayer's casual teaching position with the employer, neither the contract of employment nor the certified agreement required the employer to make superannuation contributions for the taxpayer. The employer made contributions to an accumulation fund, at the rate of 9% of the taxpayer's ordinary time earnings from the taxpayer's casual teaching position for those months in which the taxpayer was paid more than $450 in a month for their casual work.

Reasons for decision
Summary: Under the SGAA, an employer will have a liability to the SGC if the employer does not reduce its charge percentage to nil in respect of an employee. The employer can reduce its charge percentage to nil and therefore avoid a liability to the SGC by making sufficient superannuation contributions to a complying superannuation fund or retirement savings account (RSA) by the relevant cut-off dates in the SGAA. Where an employer makes a contribution to a defined benefit superannuation scheme in respect of an employee, the employer's charge percentage in respect of the employee is reduced under section 22 of the SGAA. The reduction is calculated by reference to the notional employer contribution rate (NECR) specified on the benefit certificate obtained by the employer in relation to the scheme. Where an employer makes a contribution to an RSA or a fund other than a defined benefit superannuation scheme in respect of an employee, the employer's charge percentage in respect of the employee is reduced under section 23 of the SGAA. The SGAA defines 'employer' and 'employee' in section 12. The definition relies in part on the common law meaning of those terms (subsection 12(1) of the SGAA). The common law relationship between an employer and an employee is contractual. In the majority of situations, there will only be a single contract of employment between an employer and an employee. However, it is possible that there can be two or more contracts of employment existing simultaneously between an employer and an employee. In Queensland Independent Education Union of Employees AND Moreton Bay College [2002] QIRC 161; 171 QGIG 329, it was held by the Queensland Industrial Relations Commission that an employer and an employee are not precluded from entering into two separate contracts of employment which operate concurrently, provided that the work performed under those contracts of employment is not regulated by the same award or industrial instrument. In the context of the SGAA, the view that there can be two or more contracts of employment existing simultaneously between an employer and an employee means that where such a situation exists, the employer will have a separate obligation under each contract to reduce their charge percentage to nil under the SGAA to avoid a liability to the SGC. If the employer makes sufficient superannuation contributions to reduce the employer's charge percentage to nil under one contract but fails to make sufficient contributions to reduce their charge percentage to nil under the other contract, the employer will have a liability to the SGC. In the circumstances of this case, the employee was engaged by the employer as a part-time administrative assistant. A contract of employment governed this engagement. The employee was also engaged as a casual teacher with the employer. A separate contract of employment governed this engagement. The employee was thus employed under two separate contracts of employment with the employer. The work performed under those contracts was not regulated by the same industrial instrument. Rather, different certified agreements applied to the different positions. Since the contract of employment between the employee and the employer in relation to the part-time administrative position is separate to the contract of employment governing the casual teaching position, the employer will have a separate obligation under each contract to make contributions to avoid a liability to the SGC under the SGAA. In relation to the part-time administrative position, the employer was required by the relevant state law to provide superannuation support for the employee to a defined benefit superannuation scheme. The employer obtained the relevant benefit certificate in relation to the defined benefit scheme. Provided that the NECR is sufficient to reduce the employer's charge percentage to nil under section 22 of the SGAA, the employer will not have a liability to the SGC under the contract of employment which governs the employee's part-time administrative position. In relation to the contract of employment which governed the employee's casual teaching position, the employer did not have an obligation under the contract or under the relevant certified agreement to make superannuation contributions for the benefit of the employee. Notwithstanding the lack of such an obligation, the employer is still required to make contributions in order to avoid a liability to the SGC under the SGAA in respect of the employee's casual teaching position. Any contributions made in respect of the casual teaching position must be calculated by reference to 'ordinary time earnings' and will reduce the employer's charge percentage under subsection 23(5) of the SGAA. By virtue of subsection 27(2) of the SGAA, there will be no requirement to make contributions where the employee is paid salary or wages of less than $450 in a month in respect of the casual teaching position.

Legislative references: Superannuation Guarantee (Administration) Act 1992 section 12 subsection 12(1) section 22 section 23 subsection 23(5) subsection 27(2)
Case references: Queensland Independent Education Union of Employees AND Moreton Bay College (aka QIEU v. Morton Bay College) [2002] QIRC 161 171 QGIG 329
Subject references: Defined benefit superannuation funds Employees SGC benefit certificate Superannuation contributions Superannuation guarantee charge