The ATO is currently conducting a compliance project on certain “high risk” industries (e.g. road freight transport, electrical and automotive repair and maintenance) to identify employers who are not meeting their superannuation guarantee obligations.
Given this increased compliance focus, it is timely to provide an overview of these super obligations.
Employers are required to provide superannuation support to employees on at least a quarterly basis by the 28th day after the end of the quarter. The current rate is 9% of “ordinary time earnings”.
Where the minimum quarterly payment is either not made, or the payment is late, the employer incurs a penalty equal to the super shortfall, plus an interest component of 10% per annum and an administration charge of $20 per employee. In this situation, the entire payment is not tax deductible and the employer must lodge a superannuation guarantee statement with the ATO thereby creating even more paperwork.
Exemptions
Employers are firstly exempt from providing super guarantee contributions for employees who:
- earn less than $450 (pre-tax) during a calendar month:
- are age 70 or over; and
- are under age 18 and work no more than 30 hours a week.
Secondly, the maximum superannuation contribution base for the 2010/11 year is $42,220 per quarter or $168,880 per year. This limit determines the maximum superannuation guarantee contribution that an employer is required to make for each employee.
This means that an employer is only required to contribute 9 per cent superannuation up to this contribution base. This works out to be $15,199 a year or approximately $3,800 each quarter.
Ordinary time earnings
Ordinary time earnings (see below) are generally the amount employees earn for their “ordinary hours of work”. An “employee’s ordinary hours of work” are the hours specified in an industrial award and/or enterprise agreement.
Where employees are not covered by an award or agreement, ordinary hours may have been agreed somewhere else, for example through an employment contract.
If ordinary hours are not specified anywhere, they will comprise the normal, regular, usual or customary hours worked by the employee. In these circumstances, ordinary hours will generally be interpreted as all hours worked by the employee.
Below is an updated checklist that employers can use to determine whether certain payments constitute “ordinary time earnings” OTE) for the purpose of making superannuation guarantee contributions for employees.
| Payment Type | OTE |
|---|---|
| Overtime hours – award stipulates ordinary hours to be worked and employee works additional hours for which they are paid overtime rates | No |
| Overtime hours – agreement prevailing over award | No |
| No ordinary hours of work stipulated | Yes |
| Casual employee whose hours are paid at overtime rates due to a ‘bandwidth’ clause | No |
| Piece-rates – no ordinary hours of work stipulated | Yes |
| Shift loading | Yes |
| Allowance by way of unconditional extra payment | Yes |
| Expense allowance expected to be fully expended | No |
| Danger allowance | Yes |
| Retention allowance | Yes |
| Labour portion of contractors who are deemed employees | Yes |
| Payments for unfair dismissal | No |
| Workers’ compensation – returned to work | Yes No |
| Annual leave, long service leave and sick leave taken | Yes |
| Annual Leave Loading | No |
| Parental Leave – maternity, paternity and adoption leave | No |
| Ancillary leave – e.g. jury duty, defence forces reserves leave | No |
| Termination payments – in lieu of notice | Yes No |
| Performance bonus | Yes |
| Christmas bonus | Yes |
| Bonus in respect of overtime only | No |
