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Leaving out super on leave loading

Leaving out super on leave loading

Hayley Lock & Platon Chris investigate an issue that has been causing headaches among payroll and finance teams.


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In the lead up to the end of 2018 when most of us were enjoying the festive season, an issue was circulating among payroll and finance teams causing headaches for all the wrong reasons.

As part of their preparations for entry into Single Touch Payroll (STP), many organisations have taken a proactive approach in revisiting their payroll system configuration for superannuation and PAYG withholding. As part of these reviews, many have identified that the superannuation configuration for leave loading needs to be adjusted.

Further, the Australian Taxation Office (ATO) recently updated the guidance on its website to highlight its long held view that leave loading should form part of the base for superannuation guarantee contributions (i.e. ordinary time earnings). 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”.

The practical issue for many employers is that while leave loading may have historically been provided for these specific circumstances, over the course of time, workplace practices mean leave loading is paid to a broader population of employees. In these circumstances, it may be difficult to demonstrate that leave loading can be distinguished from a general “holiday bonus” and a superannuation guarantee obligation can arise.

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