• 644 Online
  • 22066 Members
  • 24643 Posts

ATO Community

Re: Super on annual leave loading for someone who is being paid 20% Super

Ask a question

Newbie

Views 36

Replies 2

Hi 

An employee has an agreement with the employer to be paid 20% Superannual gurantee, well above the minimum 9.5% requirement.  The employer has recently assesed that annual leave loading is considered part of that employees ordianry times earning, hence super is payable on any annual leave loading paid. Given that this person is paid 20% and well above the 9.5%, would the employees now need to be paid/backpaid 20% or 9.5% on their annual leave loading taken to date and in the future, assuming they weren't paid super on their annual leave loading taken in the past?

 

Thanks

Shane

1 ACCEPTED SOLUTION

Accepted Solutions
Highlighted

Best answer

ATO Certified

TaxTime Support

Replies 1

Hi @sgujjari

 

Welcome to our Community.

 

The short answer is that it depends. The minimum super you must pay each quarter for each eligible employee is called the super guarantee (SG). Currently the SG is 9.5% of their ordinary time earnings (OTE).

 

The posts in the following threads explain when annual leave loading is considered OTE and when it isn't. The post in the second link also explains what an employer's minimum obligations are. They also contain some helpful links.

 

Whether there is a requirement to organise a back payment of super depends on why the employer has recently assessed that super needs to be paid on annual leave loading.

 

If it is due to a realisation that the award, agreement, contract or super fund rules requires it, but it isn't considered OTE as per the checklist, the requirement to organise a back payment will depend on the award, agreement, contract or super fund.

 

It may be that due to a change of award, agreement, contract or super fund, the payment is included in the super calculation now (e.g. from 1 July 2019) but wasn't previously (e.g. before 1 July 2019). If so, a back payment shouldn't be necessary.

 

If it has been determined that the payment should have been considered OTE prior to 1 July this year, e.g. since 1 January 2015, a back payment would generally be required.

 

When an employer misses a payment – that is, they don’t pay an employee's super on time and to the right fund – they may need to pay the super guarantee charge (SGC) and lodge a Superannuation guarantee charge (SGC) statement.

 

For more information about this, check out the missed and late payments page on our website.

 

It is likely that an SGC statement (or statements) won't be needed in your scenario, regardless of why it has now been determined that super is required on annual leave loading. This is due to the agreement to pay super at a rate of 20%.

 

For example, an employee's OTE (excluding annual leave loading) for the 1 January 2018 to 31 March 2018 quarter was $20,000. Due to the agreement to pay 20% super, an employer contribution of $4000 was paid by quarterly the cut-off date.

 

During that quarter the employee took some annual leave and was paid an annual leave loading amount of $1000. In August 2019, the employer realised that they didn't include this amount in the OTE calculation and worked out that an additional $200 needed to be paid.

 

When working out whether an SGC statement should be lodged, it needs to be determined whether the minimum 9.5% SG was paid by the cut-off date. For OTE of $21,000, the SG should have been $1995. As the employer paid $4000, an SGC statement isn't required.

 

In this scenario, the employer would organise a back payment of super in accordance with the award, agreement, contract or super fund. This would likely mean a super payment made via their usual channel (e.g. clearing house).

 

The employer would need to look at every affected quarter to determine what course of action would need to be taken.

 

Hope this helps.

 

Thanks,

 

ChrisR

2 REPLIES 2
Highlighted

Best answer

ATO Certified

TaxTime Support

Replies 1

Hi @sgujjari

 

Welcome to our Community.

 

The short answer is that it depends. The minimum super you must pay each quarter for each eligible employee is called the super guarantee (SG). Currently the SG is 9.5% of their ordinary time earnings (OTE).

 

The posts in the following threads explain when annual leave loading is considered OTE and when it isn't. The post in the second link also explains what an employer's minimum obligations are. They also contain some helpful links.

 

Whether there is a requirement to organise a back payment of super depends on why the employer has recently assessed that super needs to be paid on annual leave loading.

 

If it is due to a realisation that the award, agreement, contract or super fund rules requires it, but it isn't considered OTE as per the checklist, the requirement to organise a back payment will depend on the award, agreement, contract or super fund.

 

It may be that due to a change of award, agreement, contract or super fund, the payment is included in the super calculation now (e.g. from 1 July 2019) but wasn't previously (e.g. before 1 July 2019). If so, a back payment shouldn't be necessary.

 

If it has been determined that the payment should have been considered OTE prior to 1 July this year, e.g. since 1 January 2015, a back payment would generally be required.

 

When an employer misses a payment – that is, they don’t pay an employee's super on time and to the right fund – they may need to pay the super guarantee charge (SGC) and lodge a Superannuation guarantee charge (SGC) statement.

 

For more information about this, check out the missed and late payments page on our website.

 

It is likely that an SGC statement (or statements) won't be needed in your scenario, regardless of why it has now been determined that super is required on annual leave loading. This is due to the agreement to pay super at a rate of 20%.

 

For example, an employee's OTE (excluding annual leave loading) for the 1 January 2018 to 31 March 2018 quarter was $20,000. Due to the agreement to pay 20% super, an employer contribution of $4000 was paid by quarterly the cut-off date.

 

During that quarter the employee took some annual leave and was paid an annual leave loading amount of $1000. In August 2019, the employer realised that they didn't include this amount in the OTE calculation and worked out that an additional $200 needed to be paid.

 

When working out whether an SGC statement should be lodged, it needs to be determined whether the minimum 9.5% SG was paid by the cut-off date. For OTE of $21,000, the SG should have been $1995. As the employer paid $4000, an SGC statement isn't required.

 

In this scenario, the employer would organise a back payment of super in accordance with the award, agreement, contract or super fund. This would likely mean a super payment made via their usual channel (e.g. clearing house).

 

The employer would need to look at every affected quarter to determine what course of action would need to be taken.

 

Hope this helps.

 

Thanks,

 

ChrisR

Newbie

Replies 0

Thanks ChrisR

Top Solution Authors