ATO Rule No Superannuation Payable for On Call Allowances

This ruling is relevant to councils across Australia, not just NSW. We applied to the ATO for a ruling on behalf of a Sydney Metro Council that pays both permanent and ad hoc on-call allowances to staff under the Local Government (State) Award 2023 (Award). Permanent allowances are paid to staff who are always on call as the type of emergency for which they might be called out could happen at any time of the week outside normal working hours. Ad hoc allowances are paid to staff where, for example, an event is planned and a staff member may be called out to fix a mechanical failure. If the employees are actually called out they are paid overtime.

The Award provides that “The on-call allowance compensates employees for the requirement to be available for duty outside of ordinary hours at all times in order to attend emergency and/or breakdown work and/or supervise the call-out of other employees.”

Superannuation is payable on Ordinary Times Earnings (OTE) of employees which is defined in subsection 6(1) of the Superannuation Guarantee (Administration) Act 1992 (SGAA) as “earnings in respect of ordinary hours of work”. It is well established that overtime payments are not OTE. Accordingly, the question for the ATO was whether on-call allowances are paid in respect of ordinary hours of work.

Prior to lodging this ruling application we surveyed a sample of NSW councils and found a variety of practices. Some were not paying superannuation on any on-call allowances, some were paying it on all on-call allowances and some were only paying it on permanent on-call allowances but not on ad hoc. Councils were sometimes influenced by the definition of ‘Ordinary Pay’ in the Award which includes on call allowances where they are regularly received. However Ordinary Pay does not equal OTE, Ordinary Pay is a defined term in the Award used to calculate such things as annual leave, long service leave and sick pay etc.

The ATO concluded in its ruling that “As the permanent on-call allowance and ad-hoc on-call allowance are paid to employees under the Award relate solely to hours that are outside the employees’ ordinary hours of work, these allowances do not form part of OTE for the purposes of subsection 6(1) of the SGAA.”

The form of ruling is an administratively binding advice and the advice only applies to the applicant council. Other councils can’t rely on it however you would expect that if another council also applied with the same fact set the ATO would give the same advice. The ATO publish public versions of their private rulings and administratively binding advice, the public version of the subject ruling is attached but don’t expect to see it on the ATO website for at least another month.

Other local government awards across Australia may contain similar on call allowance provisions as the NSW Award. It is not always called on call, in one state it is “Stand by for emergency work and availability allowance” and comes with conditions for payment of the allowance including “To be eligible for the allowance the employee must have been instructed to be available for work, be readily accessible and in a fit state to perform work if called upon.” Other awards have similar conditions e.g. “An employee directed by the employer to be available for duty outside of the employee’s ordinary working hours will be on call. An employee on call must be able to be contacted and immediately respond to a request to attend work”. Payments to employees could also be called a readiness payment where the employee ”is required to hold himself/herself in readiness for a call to work after ordinary hours” or an availability allowance for “any employee instructed to be available for recall to work outside of his/her normal working hours”.

If you would like to see a copy of the ruling, please message me and I can email you the 4 page PDF.