Private ruling: Superannuation guarantee
Date of advice: 22 February 2023
Published: 11 April 2023

Ruling: Q1: Will the superannuation guarantee (SG) made jointly by both the former employer and new employer up to the maximum contribution base (MCB) be considered as provided 'on behalf of' each entity under subsection 6(2) of the Superannuation Guarantee (Administration) Act 1992 (SGAA)? | A1: Yes

Relevant facts and circumstances: In the application you made the following statements: • The former employer and the new employer are leading information storage and data management organisations, providing unique technology systems, network management and software services. • A notification issued to relevant stakeholders on XX XXX XXXX, informs these stakeholders that on XX XXX XXXX, employees will be moved/transferred from their former employer to a new employer. • The change in legal entity, transfer of employees from their former to a new employer, does not change the organisational structure, but simply brings the companies' employees, customers, partners, and suppliers under one legal entity, creating a more efficient, simplified, and unified approach of doing business. • This notification further states that the same contractual terms continue to be applicable to the transferred employees. The transfer does not change the employees' job, responsibilities, base pay, car or health allowances, or sales incentives and all accrued benefits are carried over, such as accrued annual leave. • No new TFN declarations and superannuation choice forms were required to be completed by the employees. • No new employment contracts were issued to the transferring employees. A transfer letter received by the affected employees outlined that their employment contracts would remain in place with only the entity name of the employer being updated to the new employing entity • The transfer letter further advises that: - The former employer and the new employer are related corporations and that arrangements were made for all accrued service-related entitlements to be transferred from the former employer to the new employer upon the transfer, inclusive of employees' accrued balances for annual leave, long service leave and personal leave. - Employees' existing base salary with the former employer will be preserved and the employees will continue to participate in the relevant, existing commission/bonus plan available to them before the transfer. - Employees will continue to be able to have their superannuation paid into the complying superannuation fund/s into which their superannuation contributions were paid by their former employer. • The transferred employees were moved to the new entity's payroll system, but this system is consistent across all entities in the group of entities and the payroll system shows the transfer as a continuation of the same employment. • Given the contractual intention to limit employee's SG amounts to the MCB and the fact that the transfer of employees was unable to be completed at the beginning of the relevant SG quarter, the payroll team attempted to limit the SG to the MCB by applying a single MCB to the transferring employees for the entire quarter. • For those employees that exceeded the MCB, the quarterly cap was divided in to three to calculate the equivalent cap amount per month. The new and former employers would pay the SG for the respective months the employee was employed by them. For example, the employees who transferred at the beginning of a second month of a quarter and received earnings in excess of their quarterly MCB, will have their SG contributions representing 1/3 of the MCB paid by their former employer for the first month of their employment, while the new employer will pay SG contributions representing 2/3 of the MCB for the period this employee worked for them.

Relevant legislative provisions: Superannuation Guarantee (Administration) Act 1992 Subsection 6(2) | Superannuation Guarantee (Administration) Act 1992 Subsection 15(3) ATO view document | Superannuation Guarantee Determination SGD 2017/1

Reasons for decision: Summary: The transfers of employees from a former employer to a new employer was a co-ordinated process requiring a minimal change, such as the name of employees' employing entity. The transfers did not break existing employment. This co-ordinated approach, including the payroll teams splitting of MCB quarters into 3 months across these entities, makes it evident that the former employer and the new employer were acting in the interest of and in aid of each other by collectively ensuring that their SG obligations are sufficiently complied with. | Detailed Reasoning - Detailed reasoning: Subsection 6(2) of the SGAA states: For the purposes of this Act, a reference to a contribution made by an employer for the benefit of an employee includes a reference to a contribution made on behalf of the employer. Superannuation Guarantee Determination SGD 2017/1 Superannuation guarantee: is an advance paid under section 28 of the Fair Entitlements Guarantee Act 2012 to a former employee 'salary or wages' paid by the employer to the employee for the purposes of working out a superannuation guarantee charge liability under the Superannuation Guarantee (Administration) Act 1992? , uses the ordinary and natural meaning of 'on behalf of' as it is not defined in the SGAA. The Macquarie Dictionary (Sixth Edition, 2013) defines 'on behalf of' as 'in the interest of, in aid of'. The provided information supports that the former employer and the new employer worked closely with each other to ensure the proposed SG payments will comply with employees' existing employment contracts. Both, former and new employer worked together in the interest and aid of each other. Moreover, the payroll teams across both employers worked together and in accordance with the employees' contracts, capped the SG of the transferring employees to a single MCB for the entire quarter. For those employees exceeding the MCB, the payroll teams divided the quarterly cap into 3 to calculate the equivalent cap amount per month with the former and new employers paying the SG for the respective months the affected employees were employed by them. The inclusive and co-operative nature of not only this practice, but many other practices that were implemented in the transfer process support the notion that there was a continuation of employment, and that the entities involved were aiding each other extensively. Therefore, the SG contributions that are being paid as part of this co-operative approach between these entities supports that correct SG will be provided by both, the former employer and new employer.