Issue
Does a payment of a court-ordered settlement by an employer to an employee on termination of employment of the employee, relieve the employer of the obligation to pay the superannuation guarantee charge (SGC) to the Australian Tax Office (ATO)?
Decision
No. The payment of a court-ordered settlement by an employer to an employee on termination of employment of the employee does not relieve the employer of the obligation to pay the SGC to the ATO.
Facts
The employee was paid salary or wages during their period of employment.
The employer did not provide any superannuation support for the employee for a particular year.
The employee's employment was subsequently terminated. The terms of the settlement state that the employee had to waive any rights they may have in respect of or in connection with their employment with this employer.
The settlement payment covers all claims and contemplated claims the employee may have in respect of wages, entitlements, taxes and other costs of whatsoever nature arising from their employment.
There was a court settlement whereby the employee was paid a lump sum on termination of employment.
The employer contends that they do not have to pay the SGC to the ATO because of the settlement.
Reasons for Decision
Under the Superannuation Guarantee (Administration) Act 1992 (SGAA), all employers can make sufficient superannuation contributions to a complying superannuation fund or retirement savings account for the benefit of their eligible employees by the prescribed due dates in the SGAA to avoid having to pay the SGC to the Tax Office.
Prior to 1 July 2003, those contributions were required to have been made by 28 July following the end of the financial year. From 1 July 2003, those contributions must be made on a quarterly basis, that is, by the 28th day following the end of the relevant quarter.
The SGC is a debt owed by the employer to the Commonwealth, not to the employee. Where payments are not made to a superannuation provider by the prescribed due dates in the SGAA or are paid after the due date, the SGC is still required to be paid to the ATO. Therefore, even if there has been a settlement between the employer and the employee, the terms of which waive any rights the employee may have in respect of or in connection with their employment, the SGC is still required to be paid to the ATO.
Note: Paragraph 70 of Superannuation Guarantee Ruling SGR 2009/2 provides that if the settlement payment was a non-dissected lump sum it would not count towards salary and wages or SGC.
Amendment History
Date of amendment Part Comment 18 July 2014 Reasons for decision Added note to include reference to SGR 2009/2 and identify that non-dissected payments are not salary and wages or SGC. Related public rulings (including determinations) Include reference to SGR 2009/2
Date of amendment | Part | Comment
18 July 2014 | Reasons for decision | Added note to include reference to SGR 2009/2 and identify that non-dissected payments are not salary and wages or SGC.
Related public rulings (including determinations) | Include reference to SGR 2009/2