Australia: Superannuation guarantee charge - international dimensions

Last Updated: 19 April 2013
Article by Phillip Turner

Key Points:

Where an organisation operates in more than one country, it may be necessary to refer to international treaties to find out whether the work is done outside Australia or whether an international social security agreement applies.

Globalisation presents the world with a range of opportunities and challenges. For human resource departments and superannuation practitioners, one challenge is the application of the superannuation guarantee legislation.


Where an organisation operates in more than one country, there are a range of exemptions under s 27 of the Superannuation Guarantee (Administration) Act 1992 (SGAA) that can potentially apply to take a worker outside of the compulsory superannuation regime. Before advising on whether an employer is required to pay superannuation contributions for an employee, I suggest finding out answers to the following:

  • Is the employer a resident of Australia for the purpose of the Income Tax Assessment Act 1936 (ITAA36)?
  • Is the employee a resident of Australia for the purpose of the ITAA36?
  • Will the work be done outside Australia?
  • Will the work be done in the Joint Petroleum Development Area?
  • Does a scheduled international social security agreement apply to prevent double coverage of the compulsory retirement savings arrangements?
  • What (if any) visa or entry permit will the employee hold?
  • Will the employee's position carry substantial executive responsibility?

In this article, I will look in more detail at issues around determining whether work is done outside Australia, foreign currency denominated employment contracts and international secondments.

When is work done outside Australia?

Under s 27(1)(a) and (b) of the SGAA, salary or wages paid for work done outside Australia are not to be taken into account for the purpose of making an individual superannuation guarantee shortfall calculation where either the employer or the employee is not a resident of Australia. It is therefore important to know whether work is being done outside Australia. Often this is straight forward, but with some work, such as petroleum drilling at sea, careful consideration needs to be given to the meaning of "Australia" for the purpose of the SGAA.

The SGAA does not define "Australia". However, s 15B(1) and (2) of the Acts Interpretation Act 1901 (AIA) provides that a reference in an Act to Australia is taken to include a reference to the coastal sea of Australia and an Act is taken to have effect in, and in relation to, the coastal sea of Australia as if that coastal sea were part of Australia. Subsection (4) provides that "coastal sea" includes the territorial sea of Australia and the territorial sea adjacent to an external territory and the airspace over, and the sea bed and subsoil beneath, those seas.

The AIA provides that "territorial sea" has the same meaning as in the Seas and Submerged Lands Act 1973, which in turn provides that "territorial sea" has the same meaning as in Arts 3 and 4 of the United Nations Convention on the Law of the Sea done at Montego Bay on 10 December 1982 (Convention). Rather than defining "territorial sea", those articles provide that every state has the right to establish the breadth of its territorial sea up to a limit not exceeding 12 nautical miles measured from baselines determined in accordance with the Convention and that the outer limit of the territorial sea is the line every point of which is at a distance from the nearest point of the baseline equal to the breadth of the territorial sea. Generally, the territorial sea of Australia ends 12 nautical miles from the territorial sea baseline, but in the Torres Strait, the territorial sea surrounding many islands is limited to three nautical miles or less.1

Advising on whether work done on an oil rig is work done outside Australia, typically involves obtaining a map showing the location of the rig and the territorial sea borders. Instructions such as "the rig will be more than 200 km west of Broome" provide an inadequate basis on which to advise because the proximity to various islands can be the deciding factor, rather than proximity to the mainland. For example, the territorial sea includes part of the sea around Rowley Shoals, which are located about 260 km west of Broome. Further investigation is also required where instructions are received that a rig will be located in Australian waters. The person providing the instructions could be referring to the territorial sea, the contiguous zone or Australia's exclusive economic zone. The contiguous zone and the Australia's exclusive economic zone extend beyond the territorial sea and work done in them is work done outside Australia for the purpose of the SGAA.

An employee's role can involve doing work both inside and outside Australia. For example, over a 14 day roster, an employee might spend eight days on a rig in the contiguous zone and two working in a Perth office. With that type of roster, if either the employer or the employee is not a resident of Australia, part of the employee's salary will be excluded and, unless another exclusion applies, the salary will need to be apportioned between work done inside Australia and work done outside in order to determine the superannuation payable.

Technology also has the potential to raise issues around whether work is being done outside Australia. Consider, by way of example, a person employed by a broking business in the United Kingdom who telephones a small number of people in Australia to buy parcels of shares on the London Stock Exchange. Imagine that this employee has recently moved from Australia to the United Kingdom, continues to hold investments in Australia and remains a resident of Australia for the purpose of the ITAA36. In Regulatory Guide 121:
Doing financial services business in Australia, ASIC suggests that the broking business is likely to need an AFS licence, because it is likely that it is carrying on a financial services business in Australia.2 Given a financial services business can be carried on in Australia without a presence in Australia, there is an argument that work could be done inside Australia by an employee who is located outside Australia.

Foreign currency denominated contracts

Some employees who are residents of Australia and perform work here for an employer based abroad have employment contracts that provide for salary or wages denominated in a foreign currency. Ordinary time earnings for these employees in Australian dollars will vary from quarter to quarter due to exchange rate movements. As a result, the amount of contributions required to be made to a complying superannuation fund for the employee for the quarter to reduce the charge percentage to zero and avoid a liability for the Superannuation Guarantee Charge will also vary. This variability means that the employer retains a foreign exchange risk, despite the contract being denominated in the employer's local currency. It also complicates the calculation of an employer's individual superannuation guarantee shortfalls in the event that the employer fails to make the minimum contributions.

Employees seconded from overseas

Subsections (2)–(1 1) of s 12 of the SGAA expand the meaning of the terms "employer" and "employee" beyond their ordinary meaning. In particular, subs (3) provides that if a person works under a contract that is wholly or principally for the labour of the person, the person is an employee of the other party to the contract.

A secondment typically involves an employer entering into a secondment agreement with a client or a foreign affiliate under which the employer provides the labour of one of its employees in return for a fee and the employer agrees that it will remain solely responsible for the payment of the employee's remuneration. An argument could perhaps be made that a secondment agreement is a contract that is wholly or principally for the labour of the seconded employee and that s 12(3) deems the seconded employee to be the employee of the client or affiliate. If that argument were to succeed, an employee seconded within Australia would have two employers and double coverage under the SGAA.

Superannuation Guarantee Ruling 2005/1 stands in the way of that argument. It clearly states that where an individual performs work for another party through an entity such as a company or trust, the individual is not an employee of the other party to the contract because the company or trust has entered into the contract and not the individual.3 Likewise, the ruling states that if a partnership has contracted to provide services, a partner who provides the services is not an employee of the other party to the contract, even if the contract required the partner to do the work.4 The same logic applies where an employee is seconded by an overseas affiliate to work in Australia. The secondee would not be characterised as an employee of the local entity, because secondee has not entered into the contract.


The repeal of s 13 of the SGAA, which provided for a notional earnings base where superannuation contributions were made for the benefit of certain employees before 21 August 1991, significantly simplified the application of the SGAA. Nonetheless, pockets of complexity remain.

Where an organisation operates in more than one country, it may be necessary to refer to international treaties to find out whether the work is done outside Australia or whether an international social security agreement applies. It strikes me that this complexity is justified by the complexity of the subject matter. Likewise, the exclusion for prescribed employees in s 27(1)(d) of the SGAA and reg 7 of the Superannuation Guarantee (Administration) Regulations 1993 is complicated due to the range of visas and executive positions that it covers. However, reg 7 could be simplified by rewriting it to remove or correct some of the existing cross-references to the Migration Regulations 1994. Schedule 2 to the Migration Regulations 1994 no longer contains a reg 457.223(5)(d) or a reg 457.223(3)(b)(i).

This article was first published in the Australian Superannuation Law Bulletin, March 2013


1"Australia's Offshore Jurisdiction: Explanation of Terminology in relation to Petroleum Exploration and Development",

2Above, n 1, at 17.

3Above, n 1, at [13].

4Above, n 1, at [14].

Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this bulletin. Persons listed may not be admitted in all states and territories.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Mondaq Advice Centre (MACs)
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.