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BethanyK(Newbie)Newbie
24 June 2024

Our employees acrrue time in lieu for overtime (1:1, i.e. 1 hour accrued for 1 hour worked). If they haven't taken this time off when their employment ends, we pay it out as a lump sum. Our payroll software provider insists that no superannuation is payable on this payout because "it relates to a payment for a future period when the employee isn't employed with you anymore" and that it's the same as how annual leave payouts don't attract super. Our HR Manager believes that super IS payable on TIL payouts, because it's for OTE, i.e. they actually worked these hours. Can you please clarify?

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PayrollDeanne(Taxicorn)Taxicorn
24 June 2024

Hiya @BethanyK 👋


First of all, RDO/ADO/TOIL/Flexitime balances paid out upon termination are ETPs.


Secondly, I agree with your payroll software provider.


I disagree with your HR Manager, as that is an opinion that contradicts the ATO SGR 2009/2 paragraph 41 guidance.


When you agree that your employee will work outside of the ordinary hours of work and, instead of an immediate payment, you agree that they can exchange the payment for an ordinary time absence, that absence in service is OTE. However, if the absence is not taken and you revert to payment, that payment is in respect of work outside the ordinary hours of work that is not OTE and therefore not superable.


If the employee chose to cash out the TOIL balance in service, that cashout of TOIL in service is overtime, as per the ATO STP2 Employer Guidance.


The fundamental assessment of how to treat a payment for tax, super and reporting starts with defining the purpose and circumstances of the payment. If this is compensation for work outside of ordinary hours, it cannot be OTE. When you pay out leave or time balances upon termination, it is a projection forward into dates in the future after the period of service. The time after termination is not in respect of the ordinary hours of work, as they no longer work during that future period.


Deanne


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Most helpful reply

PayrollDeanne(Taxicorn)Taxicorn
24 June 2024

Hiya @BethanyK 👋


First of all, RDO/ADO/TOIL/Flexitime balances paid out upon termination are ETPs.


Secondly, I agree with your payroll software provider.


I disagree with your HR Manager, as that is an opinion that contradicts the ATO SGR 2009/2 paragraph 41 guidance.


When you agree that your employee will work outside of the ordinary hours of work and, instead of an immediate payment, you agree that they can exchange the payment for an ordinary time absence, that absence in service is OTE. However, if the absence is not taken and you revert to payment, that payment is in respect of work outside the ordinary hours of work that is not OTE and therefore not superable.


If the employee chose to cash out the TOIL balance in service, that cashout of TOIL in service is overtime, as per the ATO STP2 Employer Guidance.


The fundamental assessment of how to treat a payment for tax, super and reporting starts with defining the purpose and circumstances of the payment. If this is compensation for work outside of ordinary hours, it cannot be OTE. When you pay out leave or time balances upon termination, it is a projection forward into dates in the future after the period of service. The time after termination is not in respect of the ordinary hours of work, as they no longer work during that future period.


Deanne


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