In brief - Employers may avoid liability for the superannuation guarantee charge in respect of annual leave loading under the ATO's safe harbour
Annual leave loading and overtime are common employee entitlements under Australian awards and enterprise agreements.
Under SGR 2009/2
, employer superannuation contributions are required in respect of annual leave loading, unless the entitlement is demonstrably referable to a notional loss of opportunity to work overtime. This requires employers to determine the purpose of annual leave loading. Unfortunately, this is difficult because most awards and enterprise agreements do not indicate the purpose.
The ATO has introduced a safe harbour under which it will not initiate a review of employers' superannuation compliance in respect of annual leave loading for past and future periods if:
- employers self-assess that superannuation contributions are not required based on a reasonable position that annual leave loading is for a notional loss of opportunity to work overtime
- there is no evidence in the last five years that suggests that the entitlement is for something other than overtime
- employers assemble written evidence, as soon as practicable, that clarifies that annual leave loading is for loss of opportunity to work overtime and this reflects the understanding of the employer and the employee
Employers who have not made superannuation contributions in respect of annual leave loading for employees who receive overtime should consider:
- reviewing applicable awards and enterprise agreements, employment policies and other documentation to determine if any of these documents set out the purpose of annual leave loading
- if these documents do not set out the purpose, inserting wording (perhaps in the annual leave policy) that indicates that the purpose of annual leave loading is for loss of opportunity to work overtime.
This is commentary published by Colin Biggers & Paisley for general information purposes only. This should not be relied on as specific advice. You should seek your own legal and other advice for any question, or for any specific situation or proposal, before making any final decision. The content also is subject to change. A person listed may not be admitted as a lawyer in all States and Territories. © Colin Biggers & Paisley, Australia 2022.