Private ruling: Superannuation guarantee - ordinary time earnings
Published: April 2015

Ruling: Q1: Which of the various allowances you pay your employees are considered ordinary time earnings (OTE)? Advice Those allowances considered expense allowances are not considered OTE and the remainder are considered OTE.

Relevant facts and circumstances: You pay a series of allowances to your workers. Some of these allowances are paid with a reasonable expectation that the employee will fully expend the money in the course of providing services

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

Reasons for decision: Detailed Reasoning - This advice applies for the following period:: Year ended 30 June 2015 Year ended 30 June 2016 Year ended 30 June 2017 Year ended 30 June 2018 Year ended 30 June 2019 | Detailed Reasoning - The arrangement commences on:: 1 July 2014 | Detailed Reasoning - Relevant facts and circumstances: You pay a series of allowances to your workers. Some of these allowances are paid with a reasonable expectation that the employee will fully expend the money in the course of providing services | Detailed Reasoning - Relevant legislative provisions: Superannuation Guarantee (Administration) Act 1992 Subsection 6(1) . | Detailed Reasoning - Detailed reasoning: All employers are required to provide a minimum level of superannuation support for their eligible employees by the superannuation guarantee (SG) period due date. From 1 July 2008, employers must use OTE as the earning base to calculate the minimum SG contributions required for employees. | Detailed Reasoning - Ordinary time earnings: OTE, in relation to an employee, is defined in subsection 6(1) of the SGAA and is the lesser of: the total of the employee's earnings in respect of ordinary hours of work and earnings consisting of over award payments, shift loading or commission, but does not include lump sum payments made on termination of employment in lieu of unused sick leave, unused annual leave and unused long service leave; or the maximum contribution base for the quarter - the maximum contribution 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. The maximum contribution base for the 2013-14 year of income is $48,040 per quarter. This amount is indexed annually according to the indexation factor. Superannuation Guarantee Ruling SGR 2009/2 Superannuation guarantee: meaning of the terms 'ordinary time earnings' and 'salary or wages ' (SGR 2009/2) sets out the Commissioner's views on the meaning of OTE. Paragraphs 13 to 15 of SGR 2009/2 address the meaning of 'ordinary hours of work' and state: Meaning of 'ordinary hours of work' 13. An employee's 'ordinary hours of work' are the hours specified in his or her ordinary hours of work under the relevant award or agreement, or under a 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 employee's 'ordinary hours of work'. | Detailed Reasoning - Allowances: Paragraph 27 of SGR 2009/2 provides that additional payments, such as allowances and loading payments, made to employees to recognise or compensate employees for certain conditions relating to their employment are OTE except to the extent that they relate solely to hours of work other than ordinary hours of work. Paragraph 65 of SGR 2009/2 states that for the purposes of the SGAA, all allowances, except expense allowances and allowances that are fringe benefits under the FBTAA, received by an employee, are included in their 'salary or wages'. Paragraphs 72 and 73 of SGR 2009/2 address expense allowances and reimbursements and state: 72. 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'. 73. A reimbursement that compensates an employee for an expense they have incurred on behalf of the employer is also not 'salary or wages'. Therefore in your case, the allowances you have described will be included in an employee's salary and wages unless it is an expense allowance or reimbursement payment. Where the allowance is paid with the reasonable expectation that the employee will fully expend the money in the course of providing services, are not 'salary or wages' and therefore not OTE. However, where an allowance is paid regardless of whether the employee is reasonably expected to expend it, or it is paid more as compensation for a condition of employment it is 'salary or wages' and also OTE.