The compulsory application of superannuation to Annual leave loading has long been a confusing issue for employers and business owners. Conflicting advice coming out of the ATO has further compounded the issue and left payroll officers scratching their heads. Thankfully, the ATO recently clarified their position on the issue and while exceptions to the rule still exist, it has been determined that Annual leave loading is considered ordinary time earnings (OTE) and therefore subject to superannuation. As, most modern awards and employment contracts are inclusive of Annual leave loading, this clarification effects most employers, who should now look to ensuring their Superannuation calculation makes allowance for Annual Leave Loading.

Still confused or not sure if you should be paying you employees Annual leave loading? You are not alone. If you require further clarification, do not hesitate to get in touch with the Two Birds team.