Private ruling: Superannuation employee's earnings
Date of advice: 16 April 2024
Published: 27 May 2024
Date scheme commenced: 1 July 20YY

Ruling: Q1: Are an employee's earnings in respect of a rostered shift that was paid at double time rates form part of their ordinary time earnings (OTE) for the purposes of section 6 of the Superannuation Guarantee (Administration) Act 1992 (SGAA)? | A1: Yes.

Relevant facts and circumstances: The Taxpayer is a government entity. The terms of employees' employment are relevantly governed by various Enterprise Bargaining Agreement (EBA). Employees have a rest break between their rostered shifts. Most of the employees have 10-hour rest break. When an employee finishes overtime and there is no minimum rest break between the next rostered shift, they are paid a rostered rest break payment (ORB) at double time rates. The Taxpayer provides an example with an 8-hour shift and a minimum 10-hour rest break below: • An employee is rostered to work the 1st shift from 9am to 5pm and 2nd shift from 6am next day to 2pm. • There is at least 10-hour rest break between 1st shift finishing at 5pm and 2nd shift commencing at 6am next day. • Due to unforeseen workload, the employee is required to work 5 hours overtime in their 1st shift and finish at 10pm instead of 5pm • To ensure the employee has a 10-hour rest break between shifts, the employee commences their 2nd shift at 8am next day. • There are only 8 hours between the overtime finishing at 10pm and the next original rostered shift starting at 6am the next day. • The employee will be compensated for the hours they are originally rostered for, they will be paid 2 hours ORB payment for the hours between 6am and 8am.

Relevant legislative provisions: Subsection 6(1) of the Superannuation Guarantee (Administration) Act 1992

Reasons for decision: Summary: Definition of ordinary time earnings Ordinary time earnings (OTE), in relation to an employee, is defined in subsection 6(1) of the SGAA as the lesser of: (a) the total of the employee's earnings in respect of ordinary hours of work and earnings consisting of over award payments, shift loadings or commissions, but does not include lump sum payments made on the termination of employment in lieu of unused sick leave, unused annual leave and unused long service leave; or (b) the maximum contributions base for the quarter - the maximum contributions base, which is the maximum limit on the amount of superannuation support that an employer is expected to provide for the benefit of an employee. This amount is indexed annually according to the indexation factor. The Commissioner's views on OTE generally, including an employee's ordinary hours of work, are included in Superannuation Guarantee Ruling SGR 2009/2 Superannuation guarantee: meaning of the terms 'ordinary time earnings' and 'salary or wages ' (SGR 2009/2). Paragraph 12 of SGR 2009/2 provides the following meaning of the term 'earnings': 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'. Paragraphs 13 to 18 of SGR 2009/2 outline the meaning of 'ordinary hours of work', as provided below: 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. 14. The document need not use the exact expression 'ordinary hours of work', but it needs to draw a genuine distinction, for the purposes of the award or agreement, between ordinary hours and other hours. In particular, it would be expected that the other hours are remunerated at a higher rate (typically described as overtime) than the ordinary hours, or otherwise identifiable as a separate component of the total pay in respect of non-ordinary hours. 15. Any hours worked in excess of, or outside the span (if any) of, those specified ordinary hours of work are not part of the employees 'ordinary hours of work'. 16. If the ordinary hours of work are not specified in a relevant award or agreement, the 'ordinary hours of work' are the normal, regular, usual or customary hours worked by the employee, as determined in all the circumstances of the case. This is not necessarily the minimum or maximum number of hours worked or required to be worked. 17. In such cases, it may often not be possible or practicable to determine the normal, regular, usual or customary hours of an employee's work. If so, the actual hours worked should be taken to be the ordinary hours of work. 18. 'Ordinary hours of work' are not necessarily limited to hours to be worked between 9am and 5pm, Monday to Friday. They may (depending on the provision in the relevant award or agreement, if any) include hours to be worked at other times, including at night, on weekends or on public holidays. Therefore, SGR 2009/2explains that an employee's 'ordinary hours of work' are the hours specified as ordinary hours of work under the relevant award or agreement that governs the employee's conditions of employment. It highlights that any hours worked in excess of, or outside the span of, those specified ordinary hours of work are not part of the employee's 'ordinary hours of work'. In particular, paragraphs 25 and 26 of SGR 2009/2 states that: 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. 26. An award or agreement may itself have a definition of 'ordinary time earnings' that purports to apply for superannuation purposes. However, the central question posed by the definition of OTE in the SGAA is what amounts are 'earnings in respect of ordinary hours of work'. This could in some cases be a different amount from any purported amount of 'OTE' in the award or agreement. As mentioned in paragraph 13 of this Ruling, the Commissioner accepts that 'ordinary hours of work' are as determined by the relevant award or agreement, but that does not imply that OTE itself is necessarily as determined by the award or agreement. | Detailed Reasoning - Application of the law to your circumstances: An employee's ordinary hours of work' are the hours specified as their ordinary hours of work under the relevant award or agreement. The rostered hours in the example are 8 hours shift: • 1st rostered shift from 9am to 5pm • 2nd rostered shift from 6am to 2pm next day Therefore, pursuant to paragraph 13 of SGR 2009/2, the shifts constitute 'ordinary hours of work'. However, with specific regard to the example described in the facts where: • The 1st rostered shift from 9am to 5pm runs longer, and does not finish until 10pm. • The 2nd rostered shift (hours from 6am to 8am) is paid at double time rates due to the employee not receiving a minimal rest break between 10pm to 6am. The Commissioner considers the employee's 2nd shift (6am to 2pm) constitutes 'ordinary hours of work', as it is a shift that is part of the normal roster set out in the relevant agency agreements. Despite the employee's first two hours (6am to 8am) in the 2nd shift being paid at double time rates, such earnings are in respect of ordinary hours of work. Consequently, the employee's earnings (including double time rates) from the 2nd shift in the example constitute OTE pursuant to subsection 6(1) of the SGAA. With respect to the employee's earnings from their 2nd shift in the example, the Taxpayer is required to provide a minimum level of superannuation guarantee rate for the relevant period of the employee's OTE. The superannuation guarantee will be paid by Taxpayer on the associated earnings including those are paid at double time rates.