Do employers have to pay superannuation guarantee on allowances?
– An employer that pays allowances?
At a glance:
– Employers may be liable to pay superannuation guarantee (SG) on certain types of allowances that are paid to employees.
– Ensure that SG is paid on the eligible allowances.
– Contact us if you require any clarification or advice.
An allowance is a predetermined amount paid to an employee to cover anticipated costs or paid as compensation for conditions of employment, regardless of whether an actual expense is incurred.
Expense allowances are those allowances paid to an employee with a reasonable expectation that the employee will fully expend the money on tax deductible items, in the course of providing services.
An allowance is different from a reimbursement in that an allowance is a payment for anticipated costs, where as a reimbursement is a payment for the actual costs incurred by the employees.
Superannuation guarantee (SG) contributions are payable on an employee’s ordinary time earnings and most allowances are included in ordinary time earnings.
However, allowances for deductible expenses such as working tools and motor vehicle expenses for work-related travels are not salary and wages and hence, SG is not payable on these amounts.
‘On-call’ allowances paid to employees to be available outside of their normal working hours are also excluded from ordinary time earnings and do not attract SG.
Remember: – SG is payable on most allowances except for allowances for deductible expenses and on-call allowances.