14 AugNew ATO ruling on annual leave loading and super

Posted on 14 Aug 2019

The Australian Tax Office (ATO) administers the Superannuation Guarantee legislation, and has recently issued advice on a new ruling that annual leave loading is ordinary time earnings (OTE) and therefore superable.

OTE is generally what employees earn for their ordinary hours of work. It includes things like commissions, shift loadings and allowances, but not overtime payments.  Ordinary time earnings is used to calculate the minimum super guarantee contributions for eligible employees.

The ATO ruling provides that annual leave loading is superable unless it is ‘referable to a lost opportunity to work overtime’  That is, annual leave loading is not OTE if it is demonstrably referable to a notional loss of opportunity to work overtime.  In these cases the loading is included in ‘salary or wages’.

The ATO recognise that there has been uncertainty for employers on this issue.  Most modern awards, including those in the kindergarten and early childhood sector, do not specifically state the reason the annual leave loading entitlement is provided and as a result super is payable on leave loading.

The ATO advises that if employers have self-assessed on the basis that their annual leave loading is not OTE, and there is a lack of evidence to demonstrate the purpose of the entitlement, there is a risk that they may have historical superannuation guarantee (SG) shortfalls and be liable for the SG charge.

If employers determine that they have SG shortfalls for past quarters, they are required to lodge a Super Guarantee Charge (SGC) statement with the ATO.  Early Years Managers and individual agencies should scrutinise their records and if necessary address any shortfall directly with the ATO.

Further information on this issue can be obtained directly from the ATO at this web address:  https://www.ato.gov.au/Business/Super-for-employers/In-detail/Ordinary-time-earnings/Ordinary-time-earnings—annual-leave-loading/


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