The ATO recently issued a clarification on an employer’s Superannuation Guarantee obligations. As a consequence, it could mean you have accidentally acquired a Super Guarantee shortfall. Here’s what you need to know.
For every worker, the Super Guarantee Contribution is calculated on their Ordinary Time Earnings (also known as OTE). That includes holiday leave loadings each time they are paid. The ATO’s clarification states all Super Guarantee calculations must include any holiday leave loading paid to an employee.
The Exception
There is one exception. Historically, annual leave loadings were paid as compensation for the lost opportunity to work overtime when annual leave was taken. So if your employees’ award, agreement or other documentation (e.g. policies) specifically state the leave loading is paid as compensation for lost overtime opportunities, you have nothing to worry about.
If this isn’t the case, the leave loading will be considered OTE and should be included when calculating each employee’s Super Guarantee Contribution.
What Should You Do Next?
The ATO gives employers 2 options. If you don’t currently have evidence stating leave loadings are paid as compensation for lost overtime, you need to:
1. Assess all future Super Guarantee Contributions on the basis that the annual leave loading falls within each employee’s OTE
OR
2. Obtain evidence to demonstrate the purpose of paying an annual leave loading is to compensate staff for lost overtime opportunities
Not Sure Where To Start?
Let us help you. We can review your employee awards, agreements and policies to see what they say about the purpose of paying leave loadings. If required, we will also help you obtain the evidence you need to qualify for the exception.
For help, call End2End Business Solutions on 02 8977 4002