Private ruling: Superannuation guarantee - ordinary time earnings - allowances
Date of advice: 28 July 2023
Published: 18 September 2023

Ruling: Q1: Under subsection 6(1) of the Superannuation Guarantee (Administration) Act 1992 (SGAA), does the allowance form part of ordinary time earnings (OTE) used by the employer to calculate the minimum level of superannuation guarantee (SG) support required for their employees? | A1: No. | Q2: Will an SG shortfall and a resultant SGC liability occur, if the employer does not include the allowance as part of OTE? | A2: No.

Relevant facts and circumstances: The employer has an enterprise agreement in place. Various allowances are payable under the agreement.

Relevant legislative provisions: Superannuation Guarantee (Administration) Act 1992 subsection 6(1) | Superannuation Guarantee (Administration) Act 1992 paragraph 11(1)(d) | Superannuation Guarantee (Administration) Act 1992 section 16 | Superannuation Guarantee (Administration) Act 1992 section 33 | Fringe Benefits Tax Assessment Act 1986 subsection 60A(1) | Fringe Benefits Tax Assessment Act 1986 subsection 61(1) | Fringe Benefits Tax Assessment Act 1986 subsection 61 (1AA) | Fringe Benefits Tax Assessment Act 1986 subsection 61(2) | Fringe Benefits Tax Assessment Act 1986 section 140 | Fringe Benefits Tax Assessment Act 1986 subsection 143(1) Application of the law | Question 1 | Summary | The allowance will not form part of OTE. | SG scheme | The SG scheme penalises employers who do not provide a prescribed minimum level of superannuation support in each quarter for their employees. | The meaning of ' OTE' and 'salary or wages' is central to calculating the minimum level of superannuation support, and is explained in Parts A and B of SGR 2009/2 Superannuation guarantee: meaning of the terms 'ordinary time earnings ' and 'salary or wages' (SGR 2009/2) . | OTE 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 his or her 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leave payment, or unused long service leave payment, within the meaning of the Income Tax Assessment Act 1997; and (C) (Repealed by No 15 of 2007) | (ii) earnings consisting of over-award payments, shift-loading or commission; or | (b) if the total ascertained in accordance with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. | Section 11 of the SGAA defines salary or wages and relevantly subsection 11(3) states: | 11(3) [Fringe benefits] | Fringe benefits within the meaning of the Fringe Benefits Tax Assessment Act 1986 are not salary or wages for the purposes of this Act. In discussing the relationship between 'OTE' and 'salary or wages', paragraph 7 of SGR 2009/2 states that an amount can only be part of an employee's 'OTE' if it is 'salary or wages' of the employee. | The question arises as to whether the allowance is a fringe benefit under the Fringe Benefits Tax Assessment Act 1986 (FBTAA). The allowance | The employees receive payments such as allowances to recognise or compensate for certain conditions relating to their employment. | The conditions under subsection 143(1) of the Fringe Benefits Tax Assessment Act 1986 are satisfied and as such the allowance is a fringe benefit. Accordingly, under subsection 11(3) of the SGAA, the allowance cannot be considered salary or wages. It follows that the allowance cannot be OTE for the purposes of the SGAA. Question 2 | Summary | An SG shortfall and a resultant SGC liability will not occur, if the employer does not include the allowance as part of OTE. | Application of the law | Under section 16 of the SGAA, an SGC liability is payable by an employer that has an SG shortfall for a quarter. | The employer's SG shortfall is calculated by adding together the total of the employer's individual shortfalls, nominal interest component, and administration component for the quarter. Under section 33 of the SGAA employers are required to lodge SG statements in respect of shortfalls identified. | From 1 July 2008, employers must use OTE as the earnings base in all cases in calculating their required contribution. [1] Employers may still use the notional earnings base specified in legislation or industrial agreements where these are above an employee's OTE, however this is not required by the SGAA | As concluded above, the allowance is not OTE. | It follows that excluding the allowance from OTE will neither result in an SG shortfall nor require the employer to lodge SG statements. | [1] Superannuation Laws Amendment (2004 Measures No. 2)Act 2004


This advice applies for the following period: Year ended 30 June 2017 to year ending 30 June 2025