Private ruling: Superannuation Guarantee - ordinary time earnings
Published: May 2012

Ruling: Yes, the payment forms part of OTE.

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 . You operate an enterprise in a rural area. You are considering hiring an employee and an amount will be paid to the employee to offset the cost of renting in the rural area. The amount to be paid to the employee will be included in the normal wage of the employee and tax will be withheld accordingly.

Relevant legislative provisions: Superannuation Guarantee (Administration) Act 1992 subsection 6(1)

Reasons for decision: Summary: The payment is considered to be an over award payment and forms part of OTE. Superannuation guarantee payments need to be made for all OTE payments. | Detailed Reasoning - Detailed reasoning: Under the SGAA an employer must provide the required minimum level of superannuation support for its employees by the quarterly due date (unless the employees are exempt employees) 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 - Definition of ordinary time earnings: OTE, in relation to an employee, is defined in subsection 6(1) of the SGAA. It refers to the lesser of: the total of the employee's earnings in respect of ordinary hours of work (other than lump sum payments made on termination of employment in lieu of unused sick leave, long service leave or annual leave) and earnings consisting of over-award payments, shift-loading or commission, or the maximum contribution base for the contribution period. The Commissioner's views on OTE, as defined in the SGAA, including information on allowances are contained in Superannuation Guarantee Ruling SGR 2009/2 Superannuation guarantee: meaning of the terms 'ordinary time earnings' and 'salary or wages' (SGR 2009/2) which is effective from 1 July 2009. OTE are generally what employees earn for their ordinary hours of work, including commissions, allowances (excluding expense allowances) and paid leave and do not include reimbursements or overtime payments. | Detailed Reasoning - Allowances: Certain specific types of payments are OTE as they are additional payments paid to employees to recognise or compensate for certain conditions relating to their employment such as site allowance, dirt allowance and casual loading. These kinds of payment are OTE except in certain circumstances such as where they related solely to hours of work other than ordinary hours of work SGR 2009/2 outlines when payments are considered to be ordinary time earning for. Paragraph 27 states: Many employees receive various additional payments that are described as allowances or loadings and that are paid to employees to recognise or compensate for certain conditions relating to their employment. For example: a 'site allowance' paid fortnightly at a flat rate in acknowledgement of the displacement an employee undergoes when a job requires him or her to work in a remote location These kinds of payment are OTE except to the extent that they: are not 'salary or wages', for example if they are payments of a predetermined amount to offset or reimburse particular expenses (see paragraph 72 of this Ruling); or relate solely to hours of work other than ordinary hours of work (see paragraphs 41 to 43 of this Ruling). Paragraph 72 states: Expense allowances, that is, those allowances paid to an employee with a reasonable expectation that the employee will fully expend the money in the course of providing services, are not 'salary or wages'. The additional payment is not in respect of an employment related expense, it is in the nature of an 'over award' payment. In your case you are making a payment in addition to the employee's normal salary and wages (tax is withheld). The payment is considered to be an over award payment which is specifically included as part of OTE in subparagraph (a)(ii) of the definition of ordinary time earnings in subsection 6(1) of the SGAA..

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. Contact us at the address given in the fact sheet if you have any concerns. | Question: Does a payment made to an employee as rental assistance in a rural area form part of ordinary time earnings (OTE) for the purposes of subsection 6(1) of the Superannuation Guarantee (Administration) Act 1992 (SGAA)?