Did you know that most employees should be paid superannuation on their Annual Leave Loading?

It used to be common for employers not to make superannuation payments on annual leave loading. However, in 2019 the ATO clarified that superannuation may be payable on annual leave loading.

Ordinarily, superannuation is payable with respect to ordinary time earnings. The reason for the ATO clarifying entitlements is that confusion arose about whether annual leave loading constituted ordinary time earnings or not.

Where does annual leave loading come from?
Annual leave loading is an entitlement that comes from almost all industrial instruments. This could be a Modern Award or an enterprise agreement, for example.

Annual leave loading is generally an additional payment of 17.5%, provided to an employee on top of their base rate of pay during periods of annual leave. Annual leave loading was initially incorporated into Modern Awards to compensate employees who typically receive overtime and penalty rates during work periods for the shortfall in wages during periods of annual leave.

However, through the review of Modern Awards and enterprise bargaining, over time, the entitlement to annual leave loading has been extended to classifications of employees that would not generally perform work attracting overtime and penalty rates.

In determining whether annual leave loading constitutes ordinary time earnings, it must be considered where the entitlement to annual leave loading comes from, as well as its purpose.

So, is superannuation payable on your annual leave loading??
Unless the industrial instrument which applies to your employment specifically states annual leave loading is provided to compensate an employee for the lost opportunity to work and be paid for overtime, it is highly likely that superannuation is payable on your annual leave loading.

Some things that you can do if you think that your employer has not been paying superannuation on your annual leave loading…
Read more about this issue on the ATO website: Superannuation on annual leave loading | Australian Taxation Office (ato.gov.au)

If you believe you have been underpaid superannuation entitlements on leave loading:

  • Check your payslips;
  • Contact your Payroll Officer; and

Call the ASU for advice and assistance with claiming an underpayment

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