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How cashing out annual leave can impact super contributions

How cashing out annual leave can impact super contributions

Do you need to include the cashed out portion of annual leave in an employee's ordinary time earnings for the purpose of calculating superannuation guarantee contributions?

In August 2016, the Fair Work Commission decided to vary Modern Awards to provide the opportunity for employees to cash out “excessive” accrued annual leave. The decision affects real estate employees covered by the Real Estate Industry Award 2010 or the Clerks – Private Sector Award 2010.

For a variety of reasons, the cashing out concept is growing in popularity. But there is some confusion about the impact of cashing out annual leave on superannuation guarantee contributions.

SGC Ruling 2009/2 states that “lump sum arrears payments of unused leave or salary or wages otherwise than on termination of employment are also ordinary time earnings”. So yes, you do need to include the cashed out portion of annual leave in an employee’s ordinary time earnings for the purpose of calculating superannuation guarantee contributions.

This is compared to the situation where the payment of unused leave on termination is excluded from the definition of ordinary time earnings for superannuation guarantee contribution purposes.



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