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Must the Commissioner use salary and wages in calculating an employer's individual shortfall as opposed to ordinary time earnings?

Yes. Section 19 of the Superannuation Guarantee Administration Act 1992 (SGAA), the shortfall component of the Superannuation Guarantee Charge (SGC) is calculated based on the employee's 'total salary or wages' for the year and not the employees 'notional earnings base'.

The taxpayer is an employer who made insufficient superannuation contributions to a complying superannuation fund for its employees in relation to a year of income.

The employer questions why the Commissioner calculated the individual shortfall on their employees' total salary and wages instead of their ordinary time earnings as this is what they had based their calculations on.

Under the SGAA, an employer must make at least minimum superannuation contributions in relation to an employee to avoid becoming liable to any SGC. This minimum level of contributions is calculated by reference to the employee's 'notional earnings base'. In broad terms, notional earnings base is the earnings of the employee by reference to which the employer contribution is calculated under an award, law, occupational superannuation arrangement or superannuation scheme. If no other notional earnings base is applicable, than the notional earnings base in relation to the employee is the employees' 'ordinary times earnings'.

If however, the employer does not make the required amount of superannuation contributions on behalf of their eligible employees by the due date, the employer will be liable to pay the SGC for the year in which the shortfall occurred. Pursuant to section 19 of the SGAA, the shortfall component of the SGC is calculated based on the employee's 'total salary or wages' for the year and not the employees notional earnings base.