CONTENTS Some of your employees might be asking “Are we there yet?” Improvements to SG Late Payment Offset New Ordinary Time Earnings (OTE) ruling drafted Administration Update Investment returns Quarterly Superannuation Guarantee (SG) Contributions Would you like to see more of us? Office locations Keep us up to date Are you sending your communications to the right place?

May 2009 Welcome In this edition of the Employer Newsletter, we look at the state of investment markets, discuss amendments to improve the operation of the Superannuation Guarantee late payment offset and the Taxation Office’s draft ruling on Ordinary Time Earnings.

We also provide some administration updates and, as usual, we update you on the Scheme’s investment performance and our forthcoming seminar schedule.

We value your feedback, so please feel free to send us your comments or any suggestions on what articles you'd like to see in future newsletters by emailing: employerservices@eisuper.com.au

Some of your employees might be asking “Are we there yet?”

Michael Block, General Manager – Investments, FuturePlus Financial Services, provides his answer.

The question that I am asked most often is whether the market has reached a bottom.

The answer is that I don’t know. Nobody does.

So you might then ask me, if I don’t know whether share markets will improve, do you suggest that investors continue to hold growth assets in this environment?

The answer is yes* and here are my reasons:

1. Predicting equity returns in the short-term is not easy and often not possible. That is because equities regularly make annual returns of anywhere between -30% and +50% and occasionally even higher or lower than that.

   Thus, your guess is as good as mine as to what the return from equities will be over the next year. Pick a number anywhere between -30% and +50% and you have as good a chance of being correct as the next person, no matter how expert they believe that they are.

   However, as the time period gets longer, the range of returns from equities gets lower and the return gets more certain. Over the long term (a period of at least ten years), equities have returned 7 to11% and have generally been a good long-term investment.

   Even though I am suggesting that experts are no good at picking short-term movements, there is a very good chance that they will be right in the long term.

   So, what I am saying is that there can be some bad periods, but if you stick with a well considered portfolio that includes growth assets such as equities it is a reasonable expectation that your return over a longer time period will be good and better than cash or fixed interest.

2. A 50 year old is likely to live beyond 80 years of age and as such should plan for the long term.

   As a general rule, cash will not and has not provided a good investment return over long periods and therefore should only be a temporary place to store investment funds.

3. With bonds and cash currently paying a low rate of return (under 4%) and equities being more attractively priced than they were before the financial crisis hit, the odds are even better that equities will return better than cash and fixed interest in the future.

4. There is a theory called mean-reversion that suggests that investment returns will eventually get back to their average over time.

   Based on data from one of the world’s leading fund managers, Jeremy Grantham of GMO, mean-reversion suggests that equities will make a good positive return over the next 7 years.

So what should investors do now?

Hang on, be prepared for more volatility, and make sure that their investment plan is suitable for the long term.

*Of course these views are only general and do not take into account particular investor’s investment objectives, financial situation or needs and any investor should seek personalised and professional advice from their financial planner.

Improvements to SG Late Payment Offset

The Tax Laws Amendment (2008 Measures No. 6) Bill, which includes amendments to improve the operation of the Superannuation Guarantee (SG) late payment offset, has passed through Parliament.

The existing late payment offset allows employers who make late SG contributions into a superannuation fund to reduce their SG charge liability for a quarter. This ensures employers are not required to pay the SG contribution twice (once to the fund and once to the Australian Taxation Office).

"The amendments in this Bill ensure that an employer will only be able to use the offset if they make SG contributions before they are assessed with the superannuation guarantee charge liability,” notes the Minister for Superannuation and Corporate Law, Nick Sherry.

"This measure provides an incentive for employers to make their super contributions in a more timely manner while still providing employers with the option of using the offset to reduce their Superannuation Guarantee charge liability."

The amendments also improve the operation of the general interest charge (GIC) applying to SG payments so that it will accrue on the remaining amount of any unpaid SG liability after the offset has been applied. This ensures the GIC calculation takes into account the fact that the employer has made a contribution to the fund for the employee.

These amendments will commence from the date the Bill receives Royal Assent.

New Ordinary Time Earnings (OTE) ruling drafted

The Australian Taxation Office (ATO) has released its draft ruling on Ordinary Time Earnings (OTE) for Superannuation Guarantee purposes - (SGR 2008/D2).

The new draft ruling is more comprehensive than before and clarifies the ATO’s view on the following key issues:

• overtime, and when work hours labelled as overtime, may actually fall within an employee’s ordinary hours of work; and
• the inclusion of parental leave in OTE.

The ATO’s view is that where the overtime is worked regularly then Superannuation Guarantee (SG) applies.

The ATO notes: “Where it is manifestly evident from an objective evaluation of the regular work pattern of an employee that the span of hours actually worked are consistently different to the standard working hours provided in an award or an agreement, the employee’s ‘ordinary hours of work’ for the purposes of the definition of OTE are established by that regular work pattern. These hours are considered the employee’s regular, normal, customary and usual hours, even if these hours may be remunerated at overtime or penalty rates.”

The ATO also proposes to consider all paid leave as ‘earnings in respect of ordinary hours of work’. Leave payments form an entitlement that arises from an employee’s overall service, provided during ordinary hours of work, and the rate of pay applicable to leave payments reflect these ordinary hours of service. All forms of paid leave will therefore count as service by the employee and will be considered OTE. For example, this would mean maternity, paternity or adoptive leave payments would be OTE for the purposes of the SG liability.

However, it is suggested that employers look at existing overtime payments to ensure that where they come under these new provisions that an SG contribution is made.

When finalised, the new draft ruling will replace the existing rulings covering OTE (SGR 94/4) and Salary or Wages (SGR 94/5). The final Ruling is expected to be issued in May 2009 but there is as yet no advice as to when the changes will take effect. Further information can be obtained from the ATO website at www.ato.gov.au

Administration Update

To ensure that contributions are processed as quickly and efficiently as possible, the administration team has the following reminders for you:

• Contributions are only allocated to the member’s account when we have received both the money for the contribution and the allocation paperwork. This means if you send the money today, but don't send the allocation paperwork for two weeks, the money will be allocated to the member's account in two weeks’ time because we require both pieces of information before we can process the contribution.



• When you provide the Accumulation Scheme contribution file, please ensure there are only Accumulation Scheme members in the file and when you provide the Retirement Scheme file, that there are only Retirement Scheme members in the file.



• Please note that Accumulation Scheme files should not include negative contributions. If you have made an error and need money to be refunded, please email the details separately to employerservices@eisuper.com.au.



• Please also remember that you are required to pay contributions for the Accumulation Scheme (Div A), Retirement Scheme (Div B) and the Defined Benefit Scheme (Div D) separately.

Investment returns

Quarterly returns for Contributor Financed Benefit - Retirement Scheme
As at March 2009

Strategy	Quarterly Returns
High Growth	-6.7%
Trustee Selection*	-4.9%
Diversified	-4.9%
Balanced	-4.2%
Capital Guarded	-2.6%
Cash Plus	1.0%

All figures are shown to one decimal place. Returns may vary slightly between Divisions of the Scheme.
* Available to Retirement Scheme members only.

Quarterly returns for Accumulation Scheme
As at March 2009

Strategy	Quarterly Returns
High Growth	-6.4%
Diversified	-4.9%
Balanced	-4.2%
Capital Guarded	-2.6%
Cash Plus	0.9%

All figures are shown to one decimal place. Returns may vary slightly between Divisions of the Scheme.

Quarterly Superannuation Guarantee (SG) Contributions

All employers under the SG scheme must contribute the minimum level of 9% of each eligible employee's earning base in super support for each financial year. The Superannuation Guarantee contribution is required to be contributed on at least a quarterly basis. From 1 July 2008, your employees' earning base is their ordinary times earnings (OTE).

The following describes the ATO deadlines for employer contributions and the penalties that may apply if employers do not meet them. Energy Industries employers who make monthly contributions in accordance with the Scheme rules will more than satisfy these minimum requirements and will therefore avoid any of the penalties listed.

The ATO imposes penalties if SG contributions are not made by the quarterly cut-off date by applying an SG Charge (SGC)* which is made up of three parts:

• SG shortfall amounts based on OTE
• Nominal interest on that amount (10% per annum)
• Administration fee of $20 per employee per quarter.

If the SGC and the SGC statement are not submitted by the due date for lodgement additional penalties may apply and these are:

• General Interest Charge (GIC) from the SGC due date will be incurred. GIC compounds daily until SGC and accrued GIC is paid in full. The ATO can reduce the penalty. GIC is tax deductible in the year it is incurred.



• An amendment in the SG legislation, from 24 June 2008, means that if an employer makes an SG contribution to a superannuation fund which is late, the employer can elect to have this contribution used to offset against the amount of SG charge they have to pay to the ATO for not meeting their superannuation obligations. Please refer to the ATO website for further information at www.ato.gov.au.



• Penalties may also apply for false misleading statements, avoidance, failure to provide information or failure to keep SG records.

The following table obtained from the ATO lists the standard cut-off and lodgement dates.

Superannuation Guarantee quarter ended	Cut-off date for Superannuation Guarantee Contributions	Due date for lodgement of a SG statement and payment of the SG charge if contributions are not made on time
1 July - 30 Sept	28 October	28 November
1 Oct - 31 Dec	28 January	28 February
1 Jan - 31 March	28 April	28 May
1 April - 30 June	28 July	28 August

* The SGC is not tax deductible and cannot be reduced by the ATO.

Would you like to see more of us?

As part of our service to you we offer free pre-retirement seminars to your employees, either on your site or at a venue close to you. If you'd like to organise a free seminar for employees, please call 1800 636 441.

Free pre-retirement planning seminars

Pre-retirement seminars are targeted at people who are over 50 years of age and provide information on the following: