Q. Our workforce is covered by a number of different modern awards, all of which provide for certain monetary allowances to be paid under specific circumstances. 
For example, the company does not include first aid allowance in ordinary time earnings (OTE) when calculating the employer contribution required under superannuation guarantee legislation. We have received advice that this may not be correct. 

First aid allowance is only one of several allowances we pay. Are award-based allowances included in OTE for the purpose of calculating an employer's superannuation guarantee obligations?

A.  Whether an allowance forms part of an employee's ordinary time earnings (OTE) depends on the nature of the allowance and the purpose for which it is paid.
As a general rule, allowances paid in connection with an employee's ordinary duties, qualifications, responsibilities or working conditions are included in OTE. By contrast, genuine expense reimbursements and expense allowances are generally excluded. 

Employers must calculate superannuation guarantee contributions on an employee's OTE. The current Superannuation Guarantee rate is 12%.

 

How the ATO treats allowances

The Australian Taxation Office considers many common allowances and loadings to be part of OTE because they are paid in respect of an employee's ordinary hours of work.Examples include:

  • casual loadings;

  • shift loadings;

  • site allowances;

  • dirt allowances;

  • freezer allowances; and

  • allowances paid for additional duties, responsibilities or qualifications.

These payments generally attract superannuation contributions because they form part of the employee's earnings for ordinary hours of work.

 

First aid allowance

Many modern awards, including the Manufacturing and Associated Industries and Occupations Award 2020, provide an allowance where an employee is appointed by the employer to perform first aid duties.

A first aid allowance is ordinarily paid because the employee undertakes additional responsibilities or possesses a recognised qualification that is utilised in the workplace. As the allowance relates to the employee's ordinary work duties, it will generally be included in OTE and attract superannuation contributions. 

Importantly, the allowance is not usually payable merely because an employee holds a first aid certificate. The employee is typically required to perform, or be appointed to perform, first aid duties.

 

Other work-related allowances

Leading hand allowance

A leading hand allowance is commonly paid to employees who direct, coordinate or assist in supervising the work of other employees. Because the allowance relates to duties performed during ordinary hours of work, it is generally included in OTE and attracts superannuation contributions.

 

Disability or special rates

Many awards provide additional payments where work is performed in unusually difficult, unpleasant or hazardous conditions, such as:

  • confined spaces;

  • extreme heat or cold;

  • wet or dirty environments;

  • underground work; or

  • work at heights.

These allowances are generally paid because of the conditions under which ordinary work is performed and will commonly form part of OTE. 

 

Expense allowances and reimbursements

A different approach applies to allowances intended to reimburse employees for work-related expenses.Examples may include:

  • motor vehicle allowances;

  • travel allowances;

  • tool allowances;

  • meal allowances; and

  • reimbursements for actual expenses incurred.

Where the employer reasonably expects the employee to fully expend the allowance on work-related expenses, the allowance is generally not considered OTE and superannuation contributions are not required. Similarly, genuine reimbursements of actual expenses are not ordinary time earnings. 

 

Overtime-only allowances

Allowances that relate solely to overtime worked outside an employee's ordinary hours are generally excluded from OTE. For example, an overtime meal allowance paid only because an employee works overtime would generally not attract superannuation contributions.

 

Bottom line

Allowances paid because of an employee's ordinary duties, qualifications, responsibilities or working conditions are generally included in ordinary time earnings and attract superannuation contributions. This will usually include allowances such as first aid, leading hand and shift-related allowances. However, genuine expense reimbursements and expense allowances that are expected to be fully spent on work-related costs are generally not included in OTE. 

Employers should examine the purpose of each allowance rather than relying on its label when determining superannuation obligations