The ATO’s long standing position on whether annual leave loading (‘leave loading’) forms part of OTE (and, therefore, is potentially subject to SG) is reflected in SGR 2009/2 (SGR 2009/2 Superannuation Guarantee: meaning of the terms ‘ordinary times earnings’ and ‘salary or wages’). This is clearly marked. It also includes an entitlement to paid overtime, but does not include an explicit link between overtime and annual leave loading. Senior Associate Tegan Ayling and Law Graduate Muirgen O'Seighin report.

Hi ATO, one of our employee who claim that his annual leave loading should not be taxed, he is timesheet guy,he 's getting a bit above the minimum hourly rate. High call volumes may result in long wait times. If you follow our information and it turns out to be incorrect, or it is misleading and you make a mistake as a result, we will take that into account when determining what action, if any, we should take. ‎26 November 2019 You will not continue to receive KPMG subscriptions until you accept the changes. the annual leave loading for day workers as being outside OTE. XYZ Co holds the position that the annual leave loading exists to compensate workers for the lost opportunity to work overtime, reflecting advice they have received on the historical reasons for their entitlement.

QWERTY Co drafts a policy document which clarifies the reason for the award's annual leave loading entitlement with the following paragraph: This policy clarifies that, for staff covered by [the award], the entitlement to annual leave loading under clause X is compensating for the lost opportunity for overtime, except where [the award] indicates otherwise. Employers who pay above the SG may have some flexibility in demonstrating that their obligations have been met; however, a thorough assessment would be required to confirm that this is the case.

SGR 2009/2 paragraphs 35 and 238 provide more information on leave loading and OTE. SGR 2009/2 paragraphs 213 – 215 provide more information about OTE becoming the earnings base for all employers. Any leave loading attracted by annual leave in an advance leave payment is to be added to the total leave payment when calculating the withholding. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. If an employee ceases working for you, use Tax table for unused leave payments on termination of employment.

Hi, I have a question that has raised varying responses from the ATO Is super paid on the annual leave loading component of pay? The uncertainty and practical difficulties employers have faced in applying the Commissioner's view regarding annual leave loading are relevant factors for us to consider in determining the Part 7 penalty outcome. XYZ Co employs staff under and industrial agreement that includes an entitlement to annual leave loading at a flat rate.

Additionally, as outlined in the Practice Statement, voluntary lodgment of SGC statements by an employer will be considered favourably when deciding to partially or fully remit the Part 7 penalty. In the lead up to the end of 2018, this issue was circulating among payroll and finance teams causing headaches for all the wrong reasons.

on The ATO’s position on leave loading has not changed since 2009 and the Commissioner’s view is outlined in SGR 2009/2: “ annual leave loading that is payable under some awards and industrial agreements is not OTE if it is demonstrably referable to a notional loss of opportunity to work overtime. QWERTY Co employs staff covered by a modern award. The withholding amount for the average weekly earnings of $1,533 is $367.00. The ATO’s long standing position on whether annual leave loading (‘leave loading’) forms part of OTE (and, therefore, is potentially subject to SG) is reflected in SGR 2009/2 (SGR 2009/2 Superannuation Guarantee: meaning of the terms ‘ordinary times earnings’ and ‘salary or wages’).

You will not receive KPMG subscription messages until you agree to the new policy. How should you treat leave loading payments from an SG perspective? by other written evidence (for example, a documented policy) that clarifies the reason for the entitlement, and reflects the mutual understanding of both parties to the agreement that gives rise to the entitlement. In an interesting development, the Australian Taxation Office (ATO) recently updated the guidance on its website regarding leave loading. The ATO’s position has historically been that annual leave loading was not earnings in respect of ordinary hours of work, or ordinary time earnings (OTE), and that accordingly superannuation was not payable in respect of such earnings. Our privacy policy has been updated since the last time you logged in. You are free to copy, adapt, modify, transmit and distribute this material as you wish (but not in any way that suggests the ATO or the Commonwealth endorses you or any of your services or products). Our people work with clients to solve their toughest problems, creating new ways forward to help them thrive. He insisted that from July 2019 onward, he should be paying less tax and defintly no tax for the annual leave loading. As part of their preparations for entry into Australia’s Single Touch Payroll (STP)1, many organisations have taken a proactive approach in revisiting their payroll system configurations for superannuation and PAYG withholding. If there wasn’t anything stated under any of these, then they would use OTE. Step 1: Divide the total leave payment by the number of weeks leave to give the average weekly earnings: $12,267 ÷ 8 = $1,533. Make sure you have the information for the right year before making decisions based on that information. Setup mygov and link to ATO online services, Amounts you don't need to include as income, Occupation and industry specific income and work-related expenses, Financial difficulties and serious hardship, Instalment notices for GST and PAYG instalments, Your obligations to workers and independent contractors, Encouraging NFP participation in the tax system, Australian Charities and Not-for-profits Commission, Departing Australia Superannuation Payment, Small Business Superannuation Clearing House, Annual report and other reporting to Parliament, Complying with procurement policy and legislation, Tax file number and withholding declarations, Withholding from leave payments for continuing employees, Compensation, sickness and accident payments, How to lodge your payment summary annual report, When to pay and report on activity statements, Withholding from payments to household employees, Investment income and royalties paid to foreign residents, Foreign resident entertainment, sports, construction and casino gaming activities, Performing artists contracted to perform promotional activity, PAYG withholding for external administrators and trustees of bankrupt estates, Tax table for back payments, commissions, bonuses and similar payments, Tax table for unused leave payments on termination of employment, Aboriginal and Torres Strait Islander people. Does Annual Leave Loading still consider as OTE when calculating final entitlements for an employee who resigns, retire and or terminated? They will receive a leave payment of $11,280 for the eight weeks leave.

As to whether superannuation guarantee (SG) is payable on annual leave loading depends on the reason why an employee is entitled to the leave loading. 01:30 PM. award or  industrial agreement). All rights reserved. Per SG 2009/2, the only circumstances where the ATO considers that leave loading can be excluded from SG calculations is where it can be demonstrated that leave loading is specifically paid in respect of “the lost ability to work overtime.”. For this reason, we won't apply compliance resources to scrutinise why annual leave loading was paid in previous quarters, where: If employers determine that they have SG shortfalls for past quarters, (for example there is evidence to suggest their annual leave loading entitlement was for something other than overtime), they are required to lodge a Super Guarantee Charge (SGC) statement with us.

Find out how KPMG's expertise can help you and your company. We want to make sure you're kept up to date. COVID-19 support – early release of super. The Australian Taxation Office (the ATO) has clarified that superannuation will be payable on annual leave loading unless there is evidence that the reason for the loading is connected to a lost opportunity to work overtime. Most awards do not specifically state the reason the annual leave loading entitlement is provided. {{vm.newUser2}}

We acknowledge the uncertainty around this topic, and the evidentiary difficulties in identifying the purpose for annual leave loading entitlements. Here are some of our stories. For more detail about our structure please visit https://home.kpmg/governance. The award includes a different annual leave loading entitlement for shift workers, who are not entitled to paid overtime. Auto-suggest helps you quickly narrow down your search results by suggesting possible matches as you type. KPMG refers to the global organization or to one or more of the member firms of KPMG International Limited (“KPMG International”), each of which is a separate legal entity. KPMG International provides no audit or other client services. Employers should not leave superannuation on leave loading to chance. Step 3: Multiply the withholding amount by the number of weeks leave: $367 × 8 = $2,936.00, The total amount to withhold from the full leave payment of $12,267 is $2,936.00. Employers with globally mobile workforces should try to check whether their Australian population receives leave loading payments (leave loading is quite a common compensation item in Australia particularly in the energy and natural resources, construction and infrastructure industries). Flash Alert is an Global Mobility Services publication of KPMG LLPs Washington National Tax practice.

Make sure you have the information for the right year before making decisions based on that information. Read the instructions for enabling JavaScript in your web browser. Our ATO Community is here to help make tax and super easier. There are no other entitlements in the award that state the annual leave loading is compensating. Before that, an employer use the earnings base specified in an award, employment agreement or the governing rules of their super fund to work out the SG contributions. ‎5 August 2019 You're right - if the employee isn't sure whether the payment is subject to tax they can contact us directly to discuss with an operator.

{{vm.newUser1}} However, the loading is always included in 'salary or wages'. 11:52 AM. The ATO’s position on leave loading has not changed since 2009 and the Commissioner’s view is outlined in SGR 2009/2: “annual leave loading that is payable under some awards and industrial agreements is not OTE if it is demonstrably referable to a notional loss of opportunity to work overtime. Example: leave in advance with leave loading. Under the Super Guarantee legislation (SGR 2009/2) an annual leave loading is not considered OTE if it relates to a notional loss of opportunity to work overtime. Please adivce. {{vm.newUser4}}. on You may need to withhold tax when you make advance payments of annual and long service leave to employees who are continuing in your employment. on Research discovered the conflicting views, including different pages of the ATO website.

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