Private ruling: Superannuation - ordinary earnings
Date of advice: 22 November 2024
Published: 13 January 2025

Ruling: Q1: Is the allowance (Allowance) paid to teaching staff considered ordinary time earnings (OTE) as defined by subsection 6(1) of the Superannuation Guarantee (Administrative) Act 1992 (SGAA). | A1: Yes. | Q2: Is the Allowance paid to support staff considered OTE as defined by subsection 6(1) of the SGAA. | A2: Yes. | Q3: Is the Allowance made to casual employees, who undertake extracurricular and co-curricular support activities considered OTE as defined by subsection 6(1) of the SGAA. | A3: Yes.

Relevant facts and circumstances: The Taxpayer is an independent school. In addition to the lessons taken during the standard school day, students participate in extra-curricular and co-curricular activities. These activities require the Taxpayer's employees to participate and supervise students. The teaching staff, support and casual staff are paid an Allowance to undertake these activities. The Allowance is not covered under the enterprise agreement or employment contract. Besides the Multi-Enterprise Agreements, teachers and support staff have employment contracts which outlines an overview of their employment conditions. The casual employees are not issued with an employment contract. The Allowance payment has not been specified in the Enterprise Agreements and the employment contracts as a reward for their services referrable solely to overtime hours. The teacher employment contract describes their regular duties to assist and participate in sporting, spiritual, pastoral care and other extracurricular activities of the school. The teacher employment contract does not stipulate that the Allowance is paid for overtime. The support staff employment contract does not have the clause which relate to the co-curricular activities. The casual employees are employed to participate in the co-curricular activities, and it is generally the only work they perform. No superannuation has been paid by the Taxpayer to teachers, and support staff in respect of the Allowance. Superannuation has been paid by the Taxpayer to casual staff in respect of the Allowance since the 20XX-XX income year. The Taxpayer provided an example to demonstrate how the Allowance is calculated.

Relevant legislative provisions: Superannuation Guarantee (Administration) Act 1992 Subsection 6(1) Superannuation Guarantee Ruling SGR 2009/2 Superannuation guarantee: meaning of the terms 'ordinary time earnings' and 'salary or wages'.

Reasons for decision: Summary: From 1 July 2008, all employers must use ordinary time earnings (OTE) as the earnings base to calculate the minimum super guarantee (SG) contributions required for their employees. The phrase 'ordinary time earnings' is defined in subsection 6(1) of the SGAA as follows: ordinary time earnings, in relation to an employee, means: (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. The SGAA does not define the expression 'earnings in respect of ordinary hours of work' or any of the terms in that expression. The Commissioner's views on OTE are included in Superannuation Guarantee Ruling SGR 2009/2 Superannuation guarantee: meaning of the terms 'ordinary time earnings' and 'salary or wages'. Paragraphs 12 and 13 of SGR 2009/2 provides the Commissioner's view of what is meant by 'earnings' and 'ordinary hours of work'. They state: 12. An employee's 'earnings', for the purpose of the definition of OTE, is the remuneration paid to the employee as a reward for the employee's services. The practical effect for superannuation guarantee purposes is that the expression 'earnings' means 'salary or wages'. 13. An employee's 'ordinary hours of work' are the hours specified as his or her ordinary hours of work under the relevant award or agreement, or under the combination of such documents, that governs the employee's conditions of employment. Paragraph 25 goes on to explain as follows: 25. All amounts of earnings in respect of employment are in respect of the employee's ordinary hours of work unless they are remuneration for working overtime hours, or are otherwise referable only to overtime or to other hours that are not ordinary hours of work. There is no such thing as earnings that are merely in respect of employment generally and are not OTE because they are not in respect of any particular hours of work. Paragraph 41 and 42 of SGR 2009/2 discuss certain specific kinds of payments are not OTE. | Detailed Reasoning - Overtime payments: 41. Payments for work performed during hours outside an employee's ordinary hours of work are not OTE. 42. This is so whether the payments are calculated at an hourly rate or the employee gets a specific loading, or an annualised or lump sum component of a total salary package, that is expressly referable to overtime hours as remuneration for overtime hours worked. As stated above, all earnings in respect of employment are in respect of the employee's ordinary hours of work, unless they are remuneration for working overtime hours or are otherwise referable only to overtime or to other hours that are not ordinary hours of work. The teacher's employment contract does not indicate that co-curricular activities are conducted solely in respect of work performed entirely outside of ordinary hours. The support staff employment contract doesn't have co-curricular activities clause. The employer reserves the right to add to or amend their duties and responsibilities in accordance with changing circumstances and business needs within the boundaries of their skill and competence. In regard to casual employees, they are employed to participate in the co-curricular activities and are generally the only work they perform at the school. Therefore, these activities are conducted in their ordinary hours of work. Paragraph 29 of SGR 2009/2 states that, for the payments not to be considered OTE, there would need to be clear evidence that they were specifically to recognise an employee's service completed entirely in non-ordinary hours. Payments referrable at least partly to results achieved in ordinary hours of work are wholly OTE. The Allowance calculation fails to show that the payment is made for the work provided solely outside ordinary hours. The calculation does not support that the payment is an overtime payment. The Allowance is not calculated based on employees' pay rate, instead, it is based on the amount determined by the Taxpayer. The Commissioner is of the opinion that the Allowance paid to teachers, support staff and casual employees is OTE and therefore is subject to superannuation guarantee payment. It is a payment made to the employee in respect of their employment as a reward for their services not referrable solely to overtime hours. | Detailed Reasoning - Conclusion: The Allowance forms part of the employees OTE for the purposes of subsection 6(1) of the SGAA. As a result, the employer has an obligation to make superannuation guarantee payments in respect of the Allowance.