Private ruling: Superannuation contributions
Published: November 2013

Ruling: Q1: 1. Are you an employee for the purposes of the Superannuation Guarantee Administration Act 1992 ? 2. Is your employer liable to pay superannuation guarantee payments for you to an Australian superannuation fund for duties performed outside of Australia? Advice/Answers 1. Yes. 2. No.

Relevant facts and circumstances: You work for an overseas employer (the Company) and have done so for several years. Prior to your work with the Company, you were employed by another company for several years. You advised that as part of your employment, the Company and the previous employer had made contributions to an overseas fund for you for several years. The Company has recently advised they have since found out they cannot make contributions for you to an overseas fund as you are not a resident of the overseas country. The Company has now proposed to correct this mistake by paying the superannuation guarantee charge for your benefit from the time you commenced with them and will continue to meet their superannuation obligations for you moving forward. You provided a copy of your contract of employment with the Company. You are employed under a Uniform Employee Contract You are a resident of Australia for taxation purposes. You advised that some of your work for the Company is done outside Australia You advised the Company pays your salary into a company you have set up.

Relevant legislative provisions: Superannuation Guarantee Administration Act 1992 Section 12 | Superannuation Guarantee Administration Act 1992 Subsection 12(3) | Superannuation Guarantee Administration Act 1992 Paragraph 27(1)(c) | Income Tax Assessment Act 1997 Subsection 6-5(2)

Reasons for decision: Summary: You are an employee for the purposes of the Superannuation Guarantee Administration Act 1992 (SGAA) and the Company is required to make superannuation contributions into a complying Australian superannuation fund for your benefit for any work or duties performed in Australia. The method the Company has proposed of paying the superannuation guarantee charge for you on work you have performed in Australia is correct. For the purpose of excess contributions tax, each amount of superannuation received from this method would be reallocated to the year to which it relates. However, as you are an Australian resident, the Company (as a non-resident employer) is not required to make superannuation contributions for you for any duties or work you perform outside of Australia. i.e. they only need to make superannuation contributions or pay the superannuation guarantee charge for work you have performed in Australia. | Detailed Reasoning - Employee for purposes of SGAA: The Superannuation Guarantee Administration Act 1992 (SGAA) states that an employer must provide the prescribed minimum level of superannuation support for its employees (unless the employees are exempt employees) or pay the superannuation guarantee charge (SGC). Section 12 of SGAA requires an employer to make superannuation guarantee (SG) contributions on behalf of: · Persons who are employees within the ordinary meaning, and · Persons who are deemed to be employees under section 12 (unless there is a specific exemption). One significant deeming in section 12 is provided by subsection 12(3) of the SGAA which states: If a person works under a contract that is wholly or principally for the labour of the person, the person is an employee of the other party to the contract. Whether a person is an employee and whether another person is their employer is a question of fact, which will depend on the circumstances of each case. It is necessary in each case to examine all the terms of the contract and to determine whether, on balance, the person is working in the service of another (as an employee) or is working on his or her own behalf (as an independent contractor). The Commissioner has issued Superannuation Guarantee Ruling SGR 2005/1 titled Superannuation Guarantee: who is an employee. Paragraph 11 of SGR 2005/1 states: 11. For the purposes of subsection 12(3), where the terms of the contract in light of the subsequent conduct of the parties indicate that: · the individual is remunerated (either wholly or principally) for their personal labour and skills; · the individual must perform the contractual work personally (there is no right of delegation); and · the individual is not paid to achieve a result, the contract is considered to be wholly or principally for the labour of the individual engaged and he or she will be an employee under that subsection. From the information provided in your contract which is headed 'Uniform Employee Contract', you are clearly an employee of the Company. As you are considered to be an employee, the Company is required to provide superannuation contributions for your benefit under section 12 of the SGAA for any work you have performed in Australia. The Company has now realised the superannuation support they have been providing for you does not meet the requirements of the SGAA. The Company has proposed to meet its superannuation obligations in respect of you by lodging the necessary superannuation guarantee statements back to when you commenced employment with them and paying the applicable superannuation guarantee charge. For employers who have not met their superannuation obligations by making regular superannuation contributions to a complying Australian superannuation fund, payment of the superannuation guarantee charge is the correct course of action. The Company cannot satisfy its obligations under the legislation by making a 'one off' payment to you. As the Company will meet its obligations by completing and lodging a superannuation guarantee statement for each period outstanding (from the date you commenced employment with them), each amount would be reallocated to the year to which it relates for the purpose of excess contributions tax. | Detailed Reasoning - Resident employees employed by non-resident employers for work done outside Australia: There are various categories of employees for whom an employer is not required to make superannuation contributions. Although these individuals may be employees for Superannuation Guarantee purposes, their salary and wages are excluded when an employer calculates whether sufficient superannuation contributions have been made to avoid liability for the SG charge. Under paragraph 27(1)(c) of the SGAA an employer is not required to make superannuation contributions for a resident employee employed by a non-resident employer for work done outside Australia. In this case you are a resident of Australia, the Company is a non-resident employer and you advised that some of your work is done outside Australia. Therefore under paragraph 27(1)(c) of the SGAA the Company is not required to make superannuation contributions or pay the superannuation guarantee charge for any work you have done outside Australia. If the Company chooses to pay you a 'one off' payment in lieu of superannuation for the work or duties you performed outside of Australia (i.e. work or duties for which they are not required to pay superannuation guarantee), any amount received will be assessed as ordinary income and needs to be included in your income tax return in the year that it is received. | Detailed Reasoning - Further issues for you to consider: A resident of Australia is required to include in their assessable income all ordinary income derived directly or indirectly from all sources, whether in or out of Australia during the income year (subsection 6-5(2) of the Income Tax Assessment Act 1997 ). As you are an employee, the salary you receive from the Company should be included in your assessable income as salary and wage income, not paid to an interposed entity. | Detailed Reasoning - Conclusion: You are an employee for the purposes of the SGAA and the Company is required to make superannuation contributions into a complying Australian superannuation fund for your benefit for any work or duties performed in Australia. The method the Company has proposed of paying the superannuation guarantee charge for you on work you have performed in Australia is correct. For the purpose of excess contributions tax, each amount of superannuation received from this method would be reallocated to the year to which it relates. However, as you are an Australian resident, the Company (as a non-resident employer) is not required to make superannuation contributions for you for any duties or work you perform outside of Australia. i.e. they only need to make superannuation contributions or pay the superannuation guarantee charge for work you have performed in Australia.