The ATO has provided clarification on the Superannuation Guarantee Ruling SGR 2009/2, confirming leave loading is considered to be ordinary time earnings (OTE) unless referable to a lost opportunity to work overtime. Clarification has been provided by the ATO on the compliance approach they will utilise for historical leave loading payments, and evidentiary requirements for future leave loading payments.
Historical payments relate to leave loading paid in the 5 year period prior to the April- June 2019 quarter.
Future payments relate to leave loading paid in the April -June 2019 quarter onwards.
CCIQ provides the following information and advice regarding superannuation payments on leave loading to assist Employers to better understand their obligations.
Employees paid as per an Award or Enterprise Agreement linked to an Award
Historical Payments
Where leave loading is paid to an employee covered by an Award or an Enterprise Agreement linked to an Award, it is in line with the history of leave loading being added into an Award. That is, leave loading is payable due to an employees’ lost opportunity to work overtime when they take annual leave.
Employers won’t need to pay superannuation on previous leave loading payments made to Employees paid as per an Award, or an Enterprise Agreement linked to an Award.
This will only apply where Employers are able to evidence that they have taken action as soon as practicable to ensure mutual understanding between employer and employee.
Employers should provide written correspondence to their employees as soon as possible to ensure there is a mutual understanding that superannuation was not paid on leave loading as the Award the employee is paid under historically provides for loss of opportunity to work overtime during periods of annual leave.
Future Payments
Employers have two options available to them:
- Employers can elect to pay superannuation on annual leave loading or
- Employers can provide written correspondence to their employees to ensure there is a mutual understanding that superannuation will not be paid on leave loading as the Award the employee is paid under historically provides for loss of opportunity to work overtime during periods of annual leave.
Non-Award Employees
Historical Payments
Where leave loading is paid to an employee who is not covered by an Award and they are not entitled to overtime, superannuation is payable on leave loading.
Employers will need to ensure superannuation is paid on leave loading payments made to employees for the previous 5 years in instances the employees were paid leave loading where they were not entitled to overtime.
Future Payments
Employers have two options available to them:
- Employers can elect to pay superannuation on annual leave loading or
- Employers can review their reasoning for paying non-Award employees leave loading to determine if it relates to a lost opportunity to work overtime while the employee is on annual leave.
Employees not covered by an Award or Enterprise agreement not being paid leave loading
No action required.
Leave loading paid on termination of employment
Leave loading paid to any employee on termination of their employment does not require superannuation to be paid.
More Information
CCIQ members can obtain a free letter template to ensure they meet the ATO compliance requirements by emailing advice@cciq.com.au.
Further information on the ATO’s compliance approach and links to the Superannuation Guarantee Ruling SGR 2009/2 can be found here.
If you have any questions regarding superannuation, or any of the above information, please contact the CCIQ Employer Assistance team on 1300 135 822 or via email atadvice@cciq.com.au.