In this issue:

This Employer Update outlines changes to the following areas, which may impact on you and your employees:

• Ordinary time earnings (OTE) and
• Reportable employer superannuation contribution (RESC)

Changes to ordinary time earnings (OTE) from 1 July 2009

The Commonwealth has released its final ruling on ordinary time earnings that will apply from 1 July 2009.

Under the final ruling, OTE is defined as all earnings resulting from ordinary hours of work.
Where an award or agreement is in place, ordinary hours of work are the standard hours specified in the award or agreement. Overtime and other hours worked, outside of the ordinary hours of work, are not considered as OTE.

The following table shows the key differences between the previous ruling (SGR 94/4) and the new ruling (SGR 2009/2):

In addition to complying with the Commonwealth's requirements for SG that are based on OTE, WA public sector employers are required to comply with the SG requirements in the State Superannuation Regulations.

There are some differences between what payments are included as part of OTE under the Commonwealth's ruling and the State Super Regulations. For example maternity leave, jury duty leave, annual leave loading and workers compensation payments are included under the State Superannuation Regulations.

As a general rule, you need to first comply with the Commonwealth's OTE requirements. If a payment is excluded under the OTE definition, you still need to make SG contributions in relation to the payment under the State Superannuation Regulations, unless it is also excluded here.

For most employers you may need to amend your calculation of SG and make changes to your payroll systems.

For more information see our frequently asked questions, contact your Key Account Manager or visit the ATO's website.

Reportable Employer Superannuation Contribution (RESC)

From 1 July 2009, certain super contributions you make on behalf of your employees will need to be reported on their annual and part year payment summaries. These contributions are referred to as Reportable Employer Superannuation Contributions (RESC).

To assist you, we have developed a flyer for you to distribute to your employees to let them know how RESC affects them.

What is RESC?

RESC contributions are generally those contributions that exceed what you, as an employer, are required to contribute under Superannuation Guarantee or industrial law.

These include:

• Salary sacrifice contributions to West State Super, GESB Super or Gold State Super and;
• Any additional super contributions you pay as part of an employee's salary package (in addition to Superannuation Guarantee contributions of 9%).

Example:

In the 09/10 financial year, Lisa salary sacrifices $5,000 into her super. For tax purposes, this $5,000 is considered RESC and will need to be shown on her payment summaries.  

What is NOT RESC?

The following types of employer contributions are not considered RESC:

• Contributions you pay under a collective agreement or under SG law
• Contributions you make to meet your obligations under Federal, state or territory law;
• Contributions you make under the trust deed or governing rules of a super fund.
• After-tax contributions made by payroll

Example:

If you make SG contributions of more than 9% to your employees under a collective agreement, this is not considered RESC.

What does this mean for employees?

The changes do not affect the way an employee's assessable or taxable income is calculated. However, they must include the RESC amounts on their income tax return. The Australian Taxation Office (ATO) and Centrelink will include RESC in the applicable income tests in determining their eligibility for the following:

• Spouse superannuation contributions tax offset
• Commonwealth Government Super Co-contribution
• Deduction for personal superannuation contributions
• Medicare levy surcharge (lump sum payment in arrears) tax offset
• Higher Education Loan Programme and Student Financial Supplement Scheme repayments
• Dependency tax offset
• Pensioner tax offset
• Senior Australians tax offset
• Mature age worker tax offset

Example:

In the 09/10 financial year, if Lisa salary sacrifices $5,000 into her super, this amount would be considered RESC and would be included in the income tests to determine her eligibility for the ATO and Centrelink benefits listed above.

To ensure your employees are aware and understand how RESC affects them, it's important that you communicate these changes to them.

Where can I get more information?

For more information see our frequently asked questions, contact your Key Account Manager or visit the ATO's website.