Private ruling: Prescribed employee
Date of advice: 14 August 2017
Published: November 2017

Ruling: Q2: Is the Worker a 'prescribed employee’ of the Principal for the purposes of paragraph 27(1)(d) of the SGAA and therefore exempt from superannuation guarantee obligations for the Worker? Advice Yes. Please refer to 'why we have made this decision’.


Relevant legislative provisions: ● Superannuation Guarantee (Administration) Act 1992 section 12 | ● Superannuation Guarantee (Administration) Act 1992 section 27 | ● Superannuation Guarantee (Administration) Regulations 1993 regulation 7 | ● Migration Regulations 1994 regulation 1.03 | ● Migration Regulations 1994 regulation 457.223 ATO view documents | Superannuation Guarantee Ruling SGR 2005/1 Superannuation guarantee ruling: who is an employee?

Reasons for decision: Summary: 1. The facts and evidence suggest that the Worker is a prescribed employee of the Principal for the purposes of paragraph 27(1)(d) of the SGAA. Therefore the Principal does not have an obligation to pay SG contributions on behalf of the Worker. | Detailed Reasoning - Question 1: Is the Worker an employee of the Principal for the purposes of section 12 of the SGAA? | Detailed Reasoning - Detailed reasoning: 2. Paragraph 1 of Superannuation Guarantee Ruling SGR 2005/1 Superannuation guarantee ruling: who is an employee? (SGR 2005/1) explains when an individual is considered to be an 'employee’ under section 12 of the SGAA. The expressions 'employee’ and 'employer’ in the SGAA have both their ordinary meaning and an extended meaning. 3. The ordinary meaning of an employee is a person who receives payment in the form of salary or wages in return for work or services rendered. The extended definition in subsection 12(3) of the SGAA includes where payments for work under a contract that is wholly or principally for the person's labour the person liable to make the payment is the employer. 4. Paragraph 78 of SGR 2005/1 addresses the extended definition where a person works under a contract that is wholly or principally for the labour of the person and states: 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. | Detailed Reasoning - Conclusion: The Worker is engaged by the Principal under a full-time employment contact. The Worker is therefore considered to be an employee of the Principal. | Detailed Reasoning - Question 2: Is the Worker a 'prescribed employee’ of the Principal for the purposes of paragraph 27(1)(d) of the SGAA and therefore exempt from superannuation guarantee obligations for the Worker? | Detailed Reasoning - Detailed reasoning: 5. Subsection 27(1) of the SGAA sets out certain salary and wages to employees that are not to be taken into account when determining whether an employer has a SG shortfall. 6. Paragraph 27(1)(d) provides that 'salary or wages paid to an employee who is a prescribed employee for the purposes of this paragraph’ are excluded from a calculation of SG shortfall for the employer. 7. Subregulation 7(1) of the Superannuation Guarantee (Administration) Regulations 1993 ('SGAR’) sets out the classes of employees who are 'prescribed employees’ for the purposes of paragraph 27(1)(d) of the SGAA: (e) an employee who is the holder of a Subclass 457 (Business (Long Stay)) visa if: (i) the employee has been appointed by a company operating in Australia to be the national managing executive or deputy national managing executive or a state manager; and (ii) the employee was nominated as mentioned in paragraph 457.223(2)(c), (4)(d) or (5)(d) of Schedule 2 to the Migration Regulations 1994 or identified as mentioned in subparagraph 457.223(3)(b)(i) of that Schedule; (f) an employee who is the holder of a Subclass 457 (Business (Long Stay)) visa if: (i) the employee holds a position as a senior executive of a company operating in Australia; and (ii) the employee was nominated as mentioned in paragraph 457.223(2)(c), (4)(d) or (5)(d) of Schedule 2 to the Migration Regulations 1994 or identified as mentioned in subparagraph 457.223(3)(b)(i) of that Schedule; and (iii) the employee's position carries substantial executive responsibility; and (iv) the employee's qualifications for the position are appropriate; and (v) the employee's position is a full-time position; (g) an employee who is the holder of a Subclass 457 (Business (Long Stay)) visa if: (i) the employee is establishing a business activity in Australia on behalf of the employer; and (ii) the employee's position carries substantial executive responsibility; and (iii) the employee's qualifications for the position are appropriate; and (iv) the employee's position is a full-time position. 8. Regulation 1.03 of the Migration Regulations 1994 provides that a Subclass 457 (Business (Long Stay)) visa includes a Subclass 457 (Temporary Work (Skilled)) visa. The Worker currently holds a 'Temporary Business Entry (Class UC) – Temporary Work (Skilled) (subclass 457)’ visa. 9. The Worker has been appointed by a company operating in Australia to a 'General Manager’ role equivalent to a national managing executive, and the Worker was nominated as mentioned in paragraph 457.223(2)(c) of the Migration Regulations 1994 . The Worker is therefore a prescribed employee under paragraph 27(1)(d) of the SGAR. 10. The Worker holds a full-time position as a senior executive of a company operating in Australia, and the Worker was nominated as mentioned in paragraph 457.223(2)(c) of the Migration Regulations 1994 . The job function requirements and job description indicates that the Worker’s position carries substantial executive responsibility, and the qualifications held by the Worker are appropriate for the position. The Worker is therefore a prescribed employee under paragraph 27(1)(d) of the SGAR. | Detailed Reasoning - Conclusion – overall: 11. The Worker satisfies the requirements for a prescribed employee under subregulations 7(1)(e), 7(1)(f) and 7(1)(g) of the SGAR. The Worker is therefore a prescribed employee for the purposes of paragraph 27(1)(d) of the SGAA. Therefore the Principal does not have an obligation to pay SG contributions on behalf of the Worker.

Is the Worker an employee of the Principal for the purposes of section 12 of the Superannuation Guarantee (Administration) Act 1992 (SGAA)? | We considered these to be relevant facts: You applied for Administratively Binding Advice ('ABA’) regarding whether the Principal has SG obligations with respect to the Worker, who is the holder of a 457 Visa. | You provided the following further information by email: | ● A notification of grant of a Temporary Work (Skilled) (subclass 457) visa for the Worker; | ● A document detailing the job function requirements and job description of a 'Professional Excellence Director’ with the Principal; and | ● A document including copies of professional certifications for the Worker. | Based on the information provided, we considered the following to be relevant facts: | ● The Worker was nominated by the Sponsor for a 'Temporary Business Entry (Class UC) – Temporary Work (Skilled) (subclass 457)’ visa. | ● The Worker commenced full-time employment with the Principal, a subsidiary company of the Sponsor which is a company based in the X. | ● The requirements of the role are to provide leadership of the Principal’s business in Australia including leading development of team growth, winning contracts, delivery of sustainable business growth and developing and facilitating the creation of business plans. | ● The Worker holds qualifications relevant to the business of the Principal. | We formed our view on the facts by relying on this information: The private ruling application and the further information provided. | Assumptions: No assumptions have been made.