Issue
Does the back payment of wages to an ex-employee incur a liability under the Superannuation Guarantee (Administration) Act 1992 (SGAA)?
Decision
If the person has ceased employment with the employer at the time of the back payment, then no liability exists under the SGAA.
Facts
The taxpayer engaged employees under an award.
The taxpayer went into liquidation.
The taxpayer ceased trading.
It was identified that the taxpayer had underpaid its employees pursuant to the relevant award.
The taxpayer back pays its ex-employees.
Reasons for Decision
The superannuation guarantee charge is imposed on any superannuation guarantee shortfall of an employer in a year and the amount of the charge payable is equal to the amount of the superannuation guarantee shortfall (sections 5 and 6 of the Superannuation Guarantee Charge Act 1992) .
The superannuation guarantee shortfall consists of three components, the first component comprising 'the total of the employer's individual superannuation guarantee shortfalls for the year' (section 17 of the SGAA).
When calculating an individual shortfall under section 19 of the SGAA, there must be salary or wages paid by an employer to an employee. Therefore, in order for there to be a shortfall, and therefore a liability to the charge, there must be an employer/employee relationship.
Employee is defined in section 12 of the SGAA and given its ordinary meaning and an expanded meaning. The ordinary meaning of employee is that a person ceases to be an employee when his/her employment is terminated. Section 12 of the SGAA does expand the definition of employee but it does not expand it to include a former employee.
As a former employee is not an employee for the purposes of the SGAA, there cannot be a superannuation guarantee shortfall. As there is no superannuation guarantee shortfall, then there cannot be a superannuation guarantee charge liability.