The Australian Taxation Office has released a public ruling
confirming that employers do not have to make compulsory
superannuation contributions in respect of overtime payments.
The ATO accepts that it was never the intention of the law to
require super contributions on overtime amounts. The controversy
has been about the line between overtime earnings and other
"non-overtime" earnings (called ordinary times earnings)
which do require super contributions.
Whether the new ruling settles this controversy and provides
clear guidance for employers is, of course, another question.
The Superannuation Guarantee legislation requires employers to
provide a minimum level of superannuation support for employees
calculated by applying a contribution percentage (9%) to the
employee's ordinary times earnings. Prior to 1 July 2008 the
percentage contribution rate was, in some cases, applied to amounts
other than ordinary times earnings (such as an amount specified in
award). However, employers must now use ordinary times earnings
when calculating the required super guarantee contributions.
The ATO ruling (issued 13 May 2009) deals with the meaning of
ordinary times earnings and salary and wages, for super guarantee
purposes. The ruling (which runs 41 pages long) follows in the
footsteps of the draft ruling issued in 2008 (45 pages). The new
ruling overturns the Commissioner's previous view that ordinary
times earnings is determined by looking at the pattern of hours
worked. This old view meant that regular overtime payments required
super contributions, notwithstanding the policy that overtime
should not be caught by the super guarantee rules. The
Commissioner's logic seemed to be that regular overtime could
give rise to an implied variation of the employee's standard
working hours from those contained in a written agreement.
This change of heart is a good result for many employers.
Ordinary times earnings (OTE) now means hours specified in an award
or agreement. Work outside the span of those specified ordinary
hours is not OTE and not subject to superannuation guarantee
contributions. If ordinary times earnings are not specified in an
award or written agreement they will be taken to be the ordinary,
regular, customary or usual hours that an employee works.
The fine print
Hidden away in the ruling are a number of important statements.
According to the ruling, the Commissioner expects payments for
hours worked outside ordinary hours to be remunerated at a higher
rate, and for there to be a "genuine" distinction between
ordinary hours and other working hours. The Commissioner also seems
to be saying that other payments that relate to overtime, such as
commission, may in some cases not be subject to super guarantee
The ruling reinforces the importance of expert workplace
relations advice when preparing or updating employment agreements.
Employers should take particular care to ensure that all
remuneration paid to employees is properly characterised (and
documented) for superannuation guarantee purposes so that there are
no unpleasant surprises when the Commissioner conducts his
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