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One issue that is creating discussion for many schools is the requirement for employers to pay superannuation guarantee contributions on annual leave loading amounts. The ATO recently reiterated their position that these leave loading payments are generally considered to be part of an employee's ordinary time earnings (OTE).

We outlined in our recent ‘Update on Remuneration matters’ how earlier this year the ATO reiterated its view that annual leave loading is OTE, unless it is demonstrably referable to the lost opportunity to work overtime. It was necessary for the ATO to clarify this position as some employers had assumed that superannuation is not payable on annual leave loading, due to the fact that it was often incorporated into modern awards to compensate employees who were usually paid overtime for the fact that they would not receive this when on annual leave. Moreover, the fact that annual leave loading will generally be treated as OTE was not clearly stated on the ATO website.

As part of this clarification, the ATO also provided guidance for employers in relation to historical obligations for superannuation. The ATO states that it will not devote compliance resources in situations where superannuation had not been paid on annual leave loading where:

  • the employer reasonably self-assessed that the annual leave loading was not OTE because it was in relation to the loss of opportunity to work overtime; and
  • there is no evidence in the past five years that suggests otherwise.

Having become aware of the above, some schools are now lodging superannuation guarantee charge (SGC) statements to pay outstanding liabilities.

Action Points

If you have been paying annual leave loading but not paying superannuation, you will need to consider your historical exposure and ensure it is correct going forward.

If you have any questions or require assistance with ascertaining your obligations or lodging an SGC statement, please contact Murray Nicholls.

Paul Tan

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