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Superannuation Guarantee treatment for leave loading

Apr 24, 2019 | Accounting, Business, SMSF

As part of a broader focus on ensuring employers comply with their superannuation guarantee (SG) obligations the ATO notes that there have been some issues in determining whether annual leave loading amounts should be included as ordinary times earnings (OTE) and thus subject to SG. Keep reading for the Superannuation Guarantee treatment for leave loading!

The ATO view on this issue was outlined in SGR 2009/2, and generally the position depends on the reason the annual leave loading was payable. The ATO has announced that due to the issues in this area (largely arising from the fact that most awards don’t provide a reason for the entitlement to annual leave loading), it will be applying a concessional compliance approach.

Broadly, for previous quarters the ATO will not apply compliance resources where:
• the employer self-assessed that the annual leave loading was not OTE, with the reasonable position that the annual leave loading was for a notional loss of opportunity to work overtime;
• there is no evidence that is less than five years old (the statutory period employers are expected to keep records relating to their SG affairs) that suggests the entitlement was for something other than overtime. For future quarters however the ATO will be expecting that there is some form of written evidence to support the position that annual leave loading was payable for a notional loss of opportunity to work overtime. This might be found in the relevant award, or alternatively may be outlined in a policy of the employer. If employers do not have this written evidence they will need to attempt to obtain it as soon as practicable, or the ATO will assess their future SG obligations on the basis that the annual leave loading falls within OTE.

For More Information:
• Ordinary Time Earnings – Annual Leave Loading

The material and contents provided in this publication are informative in nature only. It is not intended to be advice and you should not act specifically on the basis of this information alone. If expert assistance is required, professional advice should be obtained.

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