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Superannuation Guarantee and Ordinary Time Earnings - compliance in the Transport Industry

For transport industry employers, the ATO has issued a worked example of how to calculate your SG obligations for long distance drivers.  The ATO have notified that they will be auditing employers randomly to ensure they are calculating superannuation accruals correctly from 1 January 2013 onwards, so if you need to recalculate your SG obligations and make a shortfall payment, do it before 30th June 2013 to minimise your audit risk.

Here's what the ATO have said:

"Since 1 July 2008, the minimum amount of super you need to pay by law has been based on your employee's ordinary time earnings (OTE). OTE are earnings in respect of ordinary hours worked by the employee and is often different from amounts determined under an award or other agreement. OTE generally also includes shift allowances, over-award payments, certain bonuses and certain allowances. However it excludes overtime, payment for unused sick or annual leave and living away from home allowances.

 Our ruling SGR 2009/2 Superannuation guarantee: meaning of the terms 'ordinary time earnings' and 'salary or wages' contains our view of the way you should calculate your super obligations. This ruling took effect from 1 July 2009 for all employers, including those in the long distance transport industry. Therefore a prospective start date of 1 July 2009 was applied - that is, for quarters beginning on 1 July 2009 and all later quarters.

Some employers in the transport industry may not be calculating OTE correctly, especially if they are basing their calculations on advice we gave in 1995. That advice was based on the law at the time and expressed the view that:

  • ordinary hours of work were effectively capped at 40 hours per week
  • if a driver was paid on a cents per kilometre basis, OTE could simply be calculated using the weekly award rate of pay."

The 1995 advice is no longer correct under the current law and you can no longer rely on it.

 

No cap to ordinary hours of work

Some employers may be incorrectly capping the ordinary hours of work (to, say, 38 or 40 hours) and treating hours worked in excess of the cap as overtime. Overtime earnings are not included in OTE.

It is generally accepted that the ordinary hours specified in an award or other document will be the ordinary hours of work of the employee, provided a distinction is made between ordinary hours and other hours. If the ordinary hours are not specified, the ordinary hours of work will be the normal or regular hours worked by the employee.

When it is not possible to determine the normal or regular hours of work (such as with casual workers), the actual hours of work should be taken as the ordinary hours of work. If the actual hours worked exceed what is considered to be standard full-time hours, you need to use the total actual hours worked and not a capped number of hours when you calculate OTE for super purposes.

The Fair Work Act 2009 contains its own definition of ordinary hours of work that effectively caps the ordinary hours of work to 38 hours for workers not under an award or agreement. You need note that the Fair Work Act 2009 definition of ordinary hours of work does not override OTE as determined under super laws. When determining ordinary hours of work and OTE for super purposes, you must comply with SGR 2009/2 Superannuation guarantee: meaning of the terms 'ordinary time earnings' and 'salary or wages'.

Example 1: Driver receives minimum payment

Anne is a long distance driver, grade 6, working under the Road Transport (Long Distance Operations) Award 2010. The award stipulates a minimum guaranteed wage payment of $725.80 per week, regardless of how little Anne actually drives. As Anne only receives this minimum payment under the award, her employer calculates the OTE using this.

Super guarantee = OTE x super guarantee (SG) rate

= minimum wage x SG rate

= $725.80 x 9%

= $65.32 per week

 

Example 2: Hourly rates

 Aaron is a long distance driver, grade 6, working under the Road Transport (Long Distance Operations) Award 2010. He is paid under the hourly driving rate method.

The hourly driving rate of $28.31 includes two components:

  • a 1.3 industry disability allowance
  • a 1.2 overtime allowance.

As Aaron works for 50 hours in a week, his employer calculates the OTE as the amount earned under the hourly driving rate for the 50 hours actually worked, less the overtime allowance (as it is not payment for ordinary hours of work).

Super guarantee (SG) = OTE x SG rate

= hourly rate earnings (less overtime allowance) x SG rate

= 50 hours x $28.31 hourly rate  x 9%
         1.2 overtime allowance

= $106.16

 

Drivers paid on a piece-rate basis

Some drivers are paid on a piece-rate basis, such as cents per kilometre. Unless the employee is subject to an award or agreement which specifies the ordinary hours of work, all payments that are made on a piece-rate basis are included in an employee's OTE. Paragraphs 230 to 234 of SGR 2009/2 contain information on piece-rate payments.

When the pay calculated under the piece-rate basis is:

  • less than the guaranteed minimum wage, the driver will be paid the minimum wage, so you calculate super guarantee using the minimum wage as OTE
  • greater than the guaranteed minimum wage, the driver will be paid the amount calculated under the piece-rate basis, so you calculate super guarantee using the piece-rate basis less any overtime allowances as OTE.

The following table summarises payments for workers paid under the piece-rate basis:

 

Payment

OTE is calculated using

Piece-rates totalling less than the guaranteed minimum wage

the guaranteed minimum wage - see Example 1

Piece-rate basis totalling more than the guaranteed minimum wage

piece-rate basis less any overtime allowances - see Example 2 and Example 3

If you do not use the correct OTE and you underpay super contributions, a super guarantee shortfall will arise and you will be liable for the super guarantee charge.

 Example 3: Cents per kilometre method

Joe, a grade 6 long distance driver, travelled from Melbourne to Darwin via the Stuart/Western Highway and was paid using the cents per kilometre basis under the Road Transport (Long Distance Operations) Award 2010. The cents per kilometre rate of 37.74 cents per kilometre includes two components:

  • a 1.3 industry disability allowance
  • a 1.2 overtime allowance.

Joe received $1,414.87 total remuneration:

37.74 cents per km x 3,749km = $1,414.87

As this amount is in excess of any minimum weekly rate, Joe's employer uses his remuneration to work out his OTE. They remove the overtime allowance from the calculations as it is not payment for ordinary hours of work. The calculation to determine the minimum amount of super guarantee is therefore:

Super guarantee (SG) = OTE x SG rate

= cents per km earnings (less overtime allowance) x SG rate

= $1,414.87  x 9%
         1.2

= $106.12