Remediation of superannuation entitlements
It was identified in 2019 that the NT Government had been under and overpaying some superannuation entitlements for periods of up to 10 years.
Most of the underpayments relate to the NT Government not making Superannuation Guarantee (SG) contributions on recreation leave loading payments (including penalties in lieu of leave loading). Most of the overpayments relate to not applying the quarterly Ordinary Time Earnings (OTE) cap to superannuation calculations.
The majority of the NT Government’s superannuation payments were made correctly, however, many NT Government employees were affected to some extent.
Members of the NTGPASS and Commonwealth Superannuation Scheme, which are both defined benefit superannuation schemes, were not affected.
Executive Contract Officers fund their superannuation contributions from within their contract package and do not receive recreation leave loading payments, so were also not affected.
Superannuation Guarantee (SG) is the term given for the minimum amount that an employer must pay into an employee’s chosen superannuation fund as part of their employment conditions.
The amount of superannuation payable for an employee is calculated as a percentage of the employee’s OTE multiplied by the superannuation rate. Go to the Australian Taxation Office’s website to view the current rates available.
OTE is what an employee earns for their ordinary hours of work including commissions, bonuses and some allowances, but not including overtime payments. Generally, SG applies to full-time, part-time and casual employees who are over 18 years and are paid at least $450 (before tax) a month.
An employee’s entitlement to SG is limited by an OTE cap that is set down in Australian Government legislation. That means that where an employee’s OTE in a quarter is greater than the cap, their employer is only obliged to pay SG up to the OTE cap. More information on the cap can be found on the Australian Taxation Office’s website.
The superannuation entitlements identified as being underpaid were:
- Recreation leave loading, including penalties in lieu of leave loading (PILS). The underpayments resulted from updated advice issued by the ATO in 2009.
- Payments in lieu of notice for termination and redundancy notice periods. The underpayments resulted from updated advice issued by the ATO in 2009.
- Acting Judges of the Supreme Court over 70 years of age. The underpayments resulted from the removal of employee age limits for SG eligibility in 2013.
- NT Government enterprise agreement commitments over and above SG requirements to pay superannuation during certain periods of unpaid parental leave since 2010.
When the NT Government paid these superannuation entitlements and interest, they were either paid to the ATO (in the case of SG) or directly to an employee’s superannuation account (for contributions during periods of unpaid parental leave). The superannuation amounts were not paid directly to employees.
It was identified that the NT Government had been overpaying superannuation by making contributions above entitlements for:
- Employees who had earned above the OTE cap in a quarter – this OTE cap was not applied to limit SG contributions when it should have been
- Some Members of the Legislative Assembly (MLAs) – by not applying formula for calculating MLA superannuation entitlements, which was recorded in legislation specific to MLAs.
Many of the superannuation overpayments were for relatively small amounts, so the Treasurer decided to waive up to the first $2,000 overpaid for employees (but not MLAs) to reduce the amounts that needed to be repaid.
NT Government paid the unpaid superannuation amounts back to when they first arose, plus interest calculated either in line with ATO requirements (for SG underpayments) or superannuation investment returns (for eligible periods of unpaid parental leave).
Superannuation overpayments for MLAs and current and former employees over the identified three year period, were recovered by reducing future superannuation contributions and seeking refunds from each individual’s superannuation fund.
The payroll system was reprogrammed and additional processes introduced to ensure superannuation is paid correctly and on time for:
- acting Supreme Court judges over the age of 70 years
- employees who receive a recreation leave loading or PILS payment
- employees who receive payments in lieu of notice for redundancy or termination
- employees taking eligible unpaid Parental Leave
- employees earning more than the OTE cap per quarter going forward.
A multiagency governance model incorporating both a working group and advisory group for employee entitlements has been established to assist the Department of Corporate and Digital Development with the express purpose to identify and address the underpayment and overpayment issues as soon as possible and ensure that superannuation is paid correctly going forward.
An executive level oversight committee was established (comprising Commissioner for Public Employment, Department of Treasury and Finance Deputy CE and Department of Corporate and Digital Development Deputy CE) to oversee the work of the advisory group and the review of enterprise agreements to ensure superannuation commitments were being met.
The executive level oversight committee also reviews and advises on interpretations of national superannuation law changes and enterprise agreements.