SGC

STEPHEN

SALARY VS ORDINARY TIMES EARNINGS

Below is a table detailing the differences between “salary” and “ordinary time earnings (OTE)”. It is important as the definition also affects the superannuation payable for an employee. Therefore the superannuation calculated is:

OTE times Superannuation Rate

OTE ($3000) x Rate (9%) = $270 (Superannuation Payable)

Employers must use ordinary time earnings (OTE) to work out the minimum superannuation contribution for their employees. If this base is different from the one in use, and the superannuation calculated is lower than the minimum threshold, the employer could be liable for the SGC (Superannuation Guarantee Charge) and also possible audit from the ATO.

Payments to an employee in relation to: Salary or wages? Ordinary time earnings?
Awards and agreements:
Overtime hours – award stipulates ordinary hours to be worked and employee works additional hours for which they are paid overtime rates Yes No
Overtime hours – agreement prevailing over award Yes No
Agreement supplanting award removes distinction between ordinary hours and other hours Yes – all hours worked Yes – all hours worked
No ordinary hours of work stipulated Yes – all hours worked Yes – all hours worked
Casual employee:
shift-loadings Yes Yes
overtime payments Yes No
Casual employee whose hours are paid at overtime rates due to a ‘bandwidth’ clause Yes No
Piece-rates – no ordinary hours of work stipulated Yes Yes
Overtime component of earnings based on ‘hourly driving rate’ formula stipulated in award Yes No
Allowances:
Allowance by way of unconditional extra payment Yes Yes
Expense allowance expected to be fully expended No No
Danger allowance Yes Yes
Retention allowance Yes Yes
Hourly on-call allowance in relation to ordinary hours of work for doctors Yes Yes
Payment of expenses
Reimbursement No No
Petty cash No No
Reimbursement of travel costs No No
Payments for unfair dismissal No No
Workers’ compensation:
returned to work Yes Yes
not working No No
Leave payments:
Annual leave Yes Yes
Parental leave – eg maternity leave, paternity leave, adoption leave No No.
Ancillary leave – eg jury duty, defence reserve service No No.
Termination payments:
in lieu of notice Yes Yes
unused annual leave Yes No
Bonuses:
Performance bonus Yes Yes
Bonus labelled as ex-gratia but in respect of ordinary hours of work Yes Yes
Christmas bonus Yes Yes
Bonus in respect of overtime only Yes No
STEPHEN

SUPER CUT-OFF DATES

From 1 July 2013, the superannuation contribution rate has being increased from 9% to 9.25%. Employers will need to make the contribution for their employees using the new rate. Generally an employer has to pay superannuation:

  1. 18 years or older
    • Pay them $450 or more (before tax) in salary or wages in a month.
  2. Younger than 18 years
    • Pay them $450 or more (before tax) in salary or wages in a month.
    • Worked at least 30 hours per week.

Superannuation must be made for each eligible employee at least 4 times a year. The payments must also be made by the following cut-off dates.

 

Quarter Period Payment cut-off date
1 1 July – 30 September 28-Oct
2 1 October – 31 December 28-Jan
3 1 January – 31 March 28-Apr
4 1 April – 30 June 28-Jul

 

As an employer, you must keep proper superannuation records for up to 5 years. The audit trail that you need to keep:

  1. Amount of super paid to each employee.
  2. Any other documents that helped you to calculate the amount of superannuation that you paid.

Record compliance is often the most basic and fundamental requirements of anyone who owns a business and / or employs staff. Failure to comply can result in massive penalties to the ATO. This is not only costly but also detrimental to the reputation of the business.