Private ruling: Super Guarantee
Published: June 2012

Ruling: Q1: Do earnings paid to workers for the rights to immediate usage of a product, negotiated separately from the payment for performance fee, fall within the definition of 'ordinary time earnings' (OTE) provided in subsection 6(1) of the Superannuation Guarantee (Administration) Act 1992 (SGAA)? Advice No. Performing workers earnings from earnings paid for immediate usage rights of a performance, negotiated separately from the payment of performance fee do not fall within the definition of OTE in subsection 6(1) of the SGAA. Please see our 'Reasons for Decision'

Relevant facts and circumstances: Your advice is based on the facts stated in the description of the scheme that is set out below. If your circumstances are significantly different from these facts, this advice has no effect and you cannot rely on it. The fact sheet has more information about relying on ATO advice . The employer pays staff under an award. The workers are paid a negotiated performance fee determined in accordance with the relevant subclauses of the award. Workers may also receive other payments relating specifically for the rights to immediate usage of the finished product. These payments are negotiated separately from the payments for performance Under a clause of the award the negotiated performance fee does not include any separate, further or later payment made or agreed to be made for the extended or continued period of utilisation of a product.

Relevant legislative provisions: Superannuation Guarantee (Administration) Act 1992 subsection 6(1) | Superannuation Guarantee (Administration) Act 1992 subsection 11(1) | Superannuation Guarantee (Administration) Act 1992 paragraph 11(1)(d) | Superannuation Guarantee (Administration) Act 1992 subsection 12(8) | Superannuation Guarantee (Administration) Act 1992 paragraph 12(8)(c)

Reasons for decision: Summary: Earnings paid to workers for the rights to immediate usage of the product, negotiated separately from the payment for service fee are not included in OTE as defined in subsection 6(1) of the SGAA. | Detailed Reasoning - Detailed reasoning: The SGAA places a requirement on all employers to provide a minimum level of superannuation support for their eligible employees by the quarterly due date, or pay the superannuation guarantee charge. The minimum level of support is calculated by multiplying the charge percentage (currently 9%) by each employee's earnings base. From 1 July 2008, an employer must use OTE as defined in subsection 6(1) of the SGAA as the earnings base to calculate the minimum superannuation contributions for their employees. This ensures that all employees are treated the same for superannuation purposes. | Detailed Reasoning - Salary or wages and OTE: For payments to employees to be considered OTE under subsection 6(1) of the SGAA they must be 'earnings in respect of ordinary hours of work'. Paragraph 12 of Superannuation Guarantee Ruling SGR 2009/2, Superannuation guarantee: meaning of the terms 'ordinary time earnings' and 'salary or wages' specifies that an employee's 'earnings' for the purposes of the definition of OTE is the amount of remuneration paid to the employee as a reward for the employee's services. For superannuation purposes the term 'earnings' means 'salary or wages'. Subsection 11(1) of the SGAA provides an inclusive definition of the term 'salary or wages'. Under paragraph 11(1)(d) payments to a person for work referred to in subsection 12(8) are specifically included in salary or wages. Paragraph 12(8)(c) includes as employees: · a person who is paid to perform services in, or in connection with, the making of any film, tape or disc or of any television or radio broadcast is an employee of the person liable to make the payment. What is significant in the language of these provisions is the use of terms such as 'work' , '…to perform services in' , and '…in the making of… ' This is consistent with the common law interpretation of salary or wages which is normally uses terms such as services, labour, or work performed for an employer for reward. Therefore, for a payment made to an worker under this award to be considered salary or wages and thus OTE it must be for the performance of duties in the making of the product. The payment must be for the work performed, services provided or labour provided in the making of the product, otherwise the payment would not satisfy either the common law definition or the extended definition of salary or wages in the SGAA. Payments attributable to earnings made from payments for immediate usage rights from the finished product subsequent to the initial negotiated performance fee under the award are not attributable to work performed in the making of the commercial. The worker does not perform any services for these additional payments so these payments are not in the nature of salary or wages under section 12 of the SGAA. This view is consistent with Superannuation Guarantee Ruling, Superannuation guarantee: payments made to sportspersons SGR 2009/1 which also deals with the interpretation of subsection 12(8) of the SGAA. Paragraph 10 and 11 of this ruling states that: In order to fall within the scope of paragraph 12(8)(a), the payment made to the sportsperson must be referable to the person's performance or participation in the performance of a sport or any similar activity, regardless of the result achieved from that participation. This causal link is apparent in the requirement that the sportsperson is 'paid to perform'. Further, under the terms of paragraph 12(8)(a), the sportsperson is required to actively participate in the sport or similar activity and that performance or participation must involve the sportsperson's physical or personal skills. Therefore, a sportsperson paid 'appearance fees' and similar payments to participate in sporting activity is an employee of the payer under the SGAA. However, a sportsperson paid 'prize money' would not be an employee of the payer (unless the sportsperson is an employee at common law) because the prize money is not paid for the sportsperson's participation in a sporting activity. Prize money is only payable if a specific result has been achieved. | Detailed Reasoning - Payments specifically for the rights to immediate usage of a performance: Payments made specifically for the rights to immediate usage of a product represent payments arising from the finished product. As such these payments are not for services performed in the making of the product. They are generally royalty or residual type payments to the workers for the rights to use property. These payments do not represent remuneration for work performed which is of the nature described in subsection 12(8) of the SGAA, and therefore do not satisfy the definition of salary or wages provided in section 11 of the SGAA. | Detailed Reasoning - Conclusion: Given the payments do not satisfy the definition of salary and wages, in accordance with paragraph 12 of SGR 2009/2 the payments cannot be considered 'earnings' for superannuation guarantee purposes. Consequently, if the payments are not 'earnings' for superannuation guarantee purposes they will not form part of the ordinary time earnings of the employees.

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