Institute of Certified Bookkeepers

SGC Does Apply to Leave Loading……Sometimes

ICB have previously advised and now have received technical confirmation from the ATO that:

  1. SGC does definitely apply to leave loading that is paid simply on top of normal earnings. So if you were normally paid $1,000 per week and when you go on leave you get $1,000 plus loading then it is deemed OTE and SGC applies


  2. SGC definitely does not apply to leave loading that is paid because you cannot work overtime when you are on annual leave. So if you were normally paid $1,000 per week and $100 overtime per week, when you go on leave you only get $1,000 as there is no overtime paid; but now you get loading, (to replace the overtime), then it is not deemed OTE, (in the same way that overtime is not OTE), and SGC therefore does not apply.

See the extract included below from the ATO:

What About the Past?

Perhaps you have been in a situation where an employer has not been paying SGC on loading, but it now appears the employer should have been paying SGC on the leave loading.

It is a decision of the employer to change policy going forward and to consider any additional SGC to be paid for the past omission.

Due to the many conflicting opinions and advice that has been given to employers until now, the employer should choose to alter policy going forward and may consider leaving the past alone. However, it is the employer's decision, as a risk remains that an employee could trigger an audit of the past application of SGC and the correct treatment may have been that SGC should have applied.

Why the Change?

A recent support call about the rate of annual leave loading led to consideration of the SGC application to the loading amount. Research discovered the conflicting views, including different pages of the ATO website. The conflicting views can be explained when considered in the complete context of the different application of the law, (as explained above).

Therefore, there is no change but the common understanding of no SGC on leave loading would appear to be incorrect in a significant number of awards and situations.

Extracted from a letter to ICB from James O’Halloran, Deputy Commissioner of Taxation:

The view held by the Commissioner since 2009 is expressed in Superannuation Guarantee Ruling SGR 2009/2 Superannuation guarantee: meaning of the terms 'ordinary time earnings' and 'salary or wages' (SGR 2009/2).

Paid Leave

235: Although leave payments are not paid for actual attendance at work or for services, the salary or wages than an employee receives in respect of periods of paid leave is a continuation of their ordinary pay during their ‘ordinary hours of work’ and therefore take the place of earnings in respect of actual hours worked. Therefore any salary or wages an employee receives while on annual leave, long service leave or sick leave is in respect of their ordinary hours of work and is OTE.

However Paragraph 238 of the SGR 2009/2 provides an exception.

238. By way of exception an annual leave loading that is payable under some awards and industrial agreements is not OTE if it is demonstrably referable to a notional loss of opportunity to work overtime. However, the loading is always included in ‘salary or wages’.

Accordingly if an employee is demonstrably working overtime on a permanent regular basis, any annual leave loading that is applicable to that overtime is not considered OTE and therefore no SGC is payable. Because this type of overtime isn’t part of the normal annual leave loading, then the normal does not apply.

Of course if the employer and employee have a specific arrangement or contract that specifies otherwise then what is agreed to specifically in that contract would apply.


  • Dated: 27th February, 2017