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KPayroll(Initiate)Initiate
3 Nov 2023

I Purchased Additional Annual Leave (PAAL) @ Base Hourly Rate and also getting SGC paid for that Salary Sacrifice during the arrangement. When I am taking PAAL I get SGC paid again for Purchased Hours. Because my company is considering them as Ordinary Time Earnings. My concern is when the company identify doubt dipping of Superannuation will they ask me to refund that SGC portion? Also, when I am Terminating and have unused PAAL hours, Tax on payout for unused hours will be Marginal Tax or Tax equal to normal gross pay. Please, provide some scenarios and any ATO document to refer. Thank you

11,863 views
8 replies
11,863 views
8 replies

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CatherineATO(Community Support)Community Support
5 Nov 2023

Hey @KaviPayroll,


It's best to talk with your employer about the overpayment of SGC and the consequences. The employer may have other options available to you. It might be an idea to advise them of the potential for the overpayment, they may be able to avoid it.


Marginal rate sounds like it would be applicable in your scenario, check out the ' Schedule 7 tax tables' for all the info you've asked for.


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KPayroll(Initiate)Initiate
8 Nov 2023

Thank you, Catherine, I have another question about the Purchase Additional Annual Leave (PAAL) program. Is it correct to interpret PAAL as Ordinary Time Earnings when purchasing leave? My assumption is that when purchasing leave through salary sacrifice, these earnings are considered Ordinary Time Earnings and are subject to Superannuation Guarantee Contribution (SGC). However, when taking the hours off from the PAAL balance, it is considered part of the Salary Sacrifice portion and cannot be classified as Ordinary Time Earnings. This means it's not subject to SGC because SGC was already paid during the PAAL arrangement.


To clarify, my understanding is that in salary packaging arrangements, the post-sacrificed salary is considered Ordinary Time Earnings, and salary sacrifice to superannuation is also considered Ordinary Time Earnings. However, salary sacrifice to other employee benefits, such as purchased leave through salary sacrifice, is NOT considered Ordinary Time Earnings. Can you please confirm if this interpretation is accurate? Thank you.

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Is Purchase Annual Leave considered as Ordinary Time Earnings or Salary Sacrifice with no SGC | ATO Community