ATO consultation on Legislative Instrument: Draft Superannuation Guarantee (Administration) (Out-of-Cycle Qualifying Earnings) Determination 2026
The Tax Institute welcomes the opportunity to make a submission to the Australian Taxation Office (ATO) in relation to the consultation on the draft Legislative Instrument, LI 2026/D3: Draft Superannuation Guarantee (Administration) (Out-of-Cycle Qualifying Earnings) Determination 2026 (LI 2026/D3).
In the development of this submission, we closely consulted with our National Fringe Benefits Tax (FBT) and Employment Taxes Technical Committee and our National Superannuation Technical Committee to prepare a considered response that represents the views of the broader membership of The Tax Institute.
We acknowledge the ATO’s objective of providing clarity on the operation of the out-of-cycle qualifying earnings rules and supporting the administration of the Payday Super regime. However, we consider that certain aspects of LI 2026/D3 may give rise to interpretative uncertainty and unintended outcomes for employers seeking to comply with the new rules.
Summary of key concerns
Our key concern with LI 2026/D3 is the inconsistency in the meaning of ‘entitlement’ between LI 2026/D3 and Taxation Ruling TR 2001/10: Income Tax: fringe benefits tax and superannuation guarantee: salary sacrifice arrangements (TR 2001/10). This inconsistency may create confusion for employers and could result in ordinary salary and wage payments being incorrectly characterised as out-of-cycle payments for the purposes of the Payday Super rules.
LI 2026/D3 contains a definition of ‘payment in advance’ that refers to a payment being made earlier than the time the employee would ordinarily become ‘entitled to the payment’. This appears to be a reference to the usual pay day for salary and wages.
In TR 2001/10 at paragraph 23, the reference to an ‘entitlement to receive salary or wages that have been earned’ is explained to be a reference to the point at which the employee has performed the employment duties to which the payment relates.
While there might be subtle differences in the actual phrases used, the point in time at which an employee is entitled to receive salary and wages is a concept that should be consistent across both pieces of guidance, and the fact that it currently is not is likely to be confusing for employers. We consider the meaning of ‘entitlement’ used in LI 2026/D3 to be the preferred meaning, as it is most in line with the common understanding of the concept.
In addition to the technical concerns outlined above, we consider that certain aspects of the drafting of LI 2026/D3 pose broader challenges for usability and interpretation. Clarifications in the drafting and illustrative examples would be useful to address these issues.
Our detailed analysis and recommendations to address these concerns and improve LI 2026/D3 are contained in Appendix A.