House of Representatives

Explanatory Memorandum

(Circulated by the authority of the Treasurer, the Hon John Dawkins, M.P.)

Chapter 2 Who is Covered by the Bill

Overview of the Chapter

This chapter sets out who the Bill applies to. It also describes who is an employer or employee for purposes of the Bill, as well as the employees for whom the employer is not required to provide superannuation support.

Explanation

Introduction

In general the Bill applies to all employers. However, special provisions apply to the Commonwealth and tax exempt Commonwealth authorities. Also employers will not have to superannuation support for certain exempt employees. These issues are discussed below.

Meaning of 'employer' and 'employee'

The Bill potentially applies to all employers in respect of their employees. An 'employer' and 'employee' have their ordinary meaning. In addition, a person will be taken to be an employer or an employee in the following circumstances:

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a person who receives payments as a member of the executive body of a body corporate (whether described as a board of directors or otherwise) is an employee of the body corporate;

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a person who works under a contract wholly or principally for labour is an employee of the other party to the contract:

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a member of a Commonwealth or State Parliament or Territory Legislative Assembly is an employee of the Commonwealth, State or Territory:

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a person who receives payments for performing, presenting, participating or providing services in connection with any music, play, dance, entertainment, sport, display, or promotional activity or any similar activity involving the exercise of creative talents is an employee of the payer;

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a person who receives payments to perform or provide services in connection with the making of any film, tape or disc or of any television or radio broadcast is an employee of the payer;

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a person who holds, or performs the duties of an appointment, office or position under the Constitution or under a law of the Commonwealth, of a State or a Territory (including members of the defence force or a police force) is an employee of the Commonwealth, State or Territory

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a member of a local government council is an employee of the council [Subclauses 12(1) to (10)]

A person will not be an employee if the person is paid to do work which is wholly or principally of a domestic or private nature on a part-time basis (i.e., no more than 30 hours a week). [Subclause 12(11)] This means that people who pay a part-time nanny or housekeeper, for example, will not have to provide superannuation support in respect of their employee. The exclusion is for domestic or private work and therefore does not extend, for example, to employees who clean office buildings.

Application to the Commonwealth

The Commonwealth as well as tax-exempt Commonwealth authorities are employers for purposes of the Act. However, the Commonwealth cannot impose superannuation guarantee charge upon itself.

In order to overcome this, and to ensure the Commonwealth and tax-exempt Commonwealth authorities are treated in the same manner as other employers, all provisions of the Bill (other than those imposing liability for the charge, penalties or allowing appeal and review rights) are taken to apply to the Commonwealth and to tax-exempt Commonwealth authorities. This means that if the Commonwealth or a tax-exempt Commonwealth authority does not provide sufficient superannuation support for its employees, the Commonwealth will be required to make a redistribution for the affected employees. Therefore, the Commonwealth and its tax-exempt authorities will still be required to pay for any individual superannuation guarantee shortfall in respect of an employee. In order to facilitate the redistribution if a shortfall exists, the Commonwealth or a tax-exempt Commonwealth authority will be taken to have paid the superannuation guarantee charge on 14 August in the year following the year in question.

A tax-exempt Commonwealth authority is an authority or body that is established under a law of the Commonwealth and is not liable for any tax under a law of the Commonwealth. [Clause 5]

Exemptions

An employer will not have to provide superannuation support in a contribution period for certain employees in the circumstances outlined below.

1.

An employer will not have to provide superannuation support for an employee once the employee reaches 65 years of age. [Paragraph 24(1)(a)]

2.

Non-residents, employed by resident or non-resident employers, where the salary and wages (see explanation below) paid to the employee is for work done outside Australia. [Paragraph 24(1)(b)]

3.

Residents employed by a non-resident employer where the salary and wages paid to the employee is for work done outside Australia. [Paragraph 24(1)(c)]

A resident for purposes of (2) and (3) is a resident for income tax purposes. [Clause 8]

4.

An employer will not have to provide superannuation support for an employee in any month where the employee receives salary and wages of less than $250. [Subclause 24(2)]

5.

Salary and wages earned by an employee who is under 18 years of age and is employed part-time will not be included in determining if an employer has an individual superannuation guarantee shortfall in respect of the employee. [Clause 25]

A part-time employee is a person who does not work more than 30 hours per week. [Subclause 6(1)]

6.

Salary and wages paid to a person in his or her capacity as a Member of the Defence Force Reserves will not be included for purposes of determining whether superannuation support should be provided. [Clause 26]

Meaning of 'Salary and Wages'

Salary and wages will have its ordinary meaning. However, its meaning will be extended to include:

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commission; and

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payments to members of an executive body (whether or not it is described as a board of directors) of a body corporate (e.g. director's fees);

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remuneration of a member of the Parliament of the Commonwealth or a State or the Legislative Assembly of a Territory;

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payments to persons who perform, present, participate in or provide services in connection with any music, play, dance, entertainment, sport, display, or promotional activity involving the exercise of creative talents;

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payments to persons who perform or provide services in connection with the making of any film, tape or disc or of any television or radio broadcast.

It will not include:

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remuneration under a contract of employment to a person who is employed part-time to do work of a domestic or private nature; and

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fringe benefits for purposes of the Fringe Benefits Tax Assessment Act 1986. [Clause 11]