Do unused amounts of annual leave attract the superannuation guarantee (SG) as part of an employee's termination payment?
From 1 July 2008, all employers have been required to make SG contributions on an earnings base no less favourable than ordinary time earnings (OTE).
In 2009,the Australian Taxation Office (ATO) released a Superannuation Guarantee Ruling (SGR 2009/2) on the meaning of OTE, as defined in the Superannuation Guarantee (Administration) Act 1992.
According to this ruling, if an employee is on annual leave the payment they receive at, or below, their normal rate of pay for ordinary hours of workis considered OTE and thus attracts SG.
However, accrued annual leave that is paid on termination is not considered OTE and therefore does not attract payments of the SG.
Clinton is the Publications Manager at Ai Group. He is responsible for a number of key services including Annotated Modern Awards, Workplace Relations Handbooks and the management of Ai Group’s HR and Health & Safety Resource Centres. Clinton has a Masters in Employment Relations and previously held advisory roles with the Workplace Authority and Fair Work Ombudsman.
