Global search
Interest, Superannuation and Income Tax
The following information is based on general advice the Scheme Administrator has received from taxation and superannuation specialists. This is intended as information only. You should seek your own personal taxation and financial advice in relation to your compensation payment and circumstances.
Interest
The Loss Assessment Formula provides for interest to be applied to the calculation of all Estimated losses for each calendar year of the claim period (2014 – 2024).
“For each calendar year in the Claim Period, the sum of a Participating Group Member’s preliminary entitlement/s to unrostered overtime, meal breaks, and rostered overtime for that calendar year will be multiplied by the interest weighting assigned to that calendar year.”
This interest weighting is to recognise that a Participating Group Member who is being compensated for underpayment of wages in the earlier part of the Claim Period has had to wait longer than a Participating Group Member who is being compensated for underpayment of wages in the later part of the Claim Period.
For example – if someone worked for NSW Health in 2014 and 2015, their interest weighting will be more than for someone who worked for NSW Health in 2023 and 2024 because the person who worked earlier in the Claim Period has had to wait longer to be compensated.
As part of the assessment process currently underway, the Scheme Administrator is determining the appropriate interest weighting scale for each calendar year of the Claim Period. When these interest weightings have been decided the Scheme Administrator will make them available to Participating Group Members.
Superannuation
In Australia, the Superannuation Guarantee system requires an employer to pay superannuation on “ordinary hours”. Overtime is not considered ordinary hours, therefore in the context of the Settlement Scheme, superannuation is not payable on the Unrostered Overtime or Rostered Overtime components. It is only payable on Unpaid Meal Breaks which are considered ordinary hours. This is provided for in the Loss Assessment Formula.
Superannuation is to be calculated at the prescribed rate applicable at the time the superannuation payment is to be paid, not the rate that was applicable at the time the wages should have been paid.
Therefore, the Scheme Administrator is required to calculate and pay superannuation at the current rate of 12%, as set by the Superannuation Guarantee laws. The Superannuation Guarantee system requires superannuation payments must be made directly into your superannuation account.
Your Notice of Assessment will provide a breakdown of your Estimated Loss and Distribution Payment, including any superannuation payable on your behalf. If you are receiving a superannuation payment you will be asked to provide the Scheme Administrator with certain details relating to your Super Fund.
Income Tax
The class action sought compensation for underpayment of wages (overtime and meal breaks). Therefore, Distribution Payments made under the Settlement Scheme are considered wages and therefore taxable as ordinary income.
The Scheme Administrator is required to withhold PAYG from your Distribution Payment and remit that tax to the ATO on your behalf.
On the Scheme Administrator’s request, the ATO has approved a class wide variation to the PAYG withholding rate. This means a PAYG rate of 39% will be applied to all Group Member Distribution Payments. The Scheme Administrator sought the class variation to make the PAYG assessment and withholding process more efficient and cost effective.
Without a class variation, the Scheme Administrator would be required to determine and individually calculate each Participating Group Member’s appropriate tax withholding rate for each financial year based on their personal circumstances, adding costs and delay to the assessment and payment process.
Please note that 39% is not the final rate at which you will be taxed, but rather a best estimate for withholding purposes only. We understand that many people’s tax rate throughout the period (2014 to 2024) would have varied and likely been lower earlier in the period than in the later stages or currently.
If a PAYG rate of 39% has resulted in too much tax withheld in your circumstances, you will receive a refund for the difference at the time you complete your next tax return, likewise if we have not withheld enough, you will have a tax liability at the time you complete your tax returns. The rate of 39% was chosen because it was expected that it would be closest to the average tax rate of Participating Group Members.
At the time the PAYG tax is remitted to the ATO on your behalf, the Scheme Administrator will provide the ATO with a breakdown of the compensation you are receiving by reference to each financial year it applies to. The ATO will use this breakdown to apply what is known as the Lump Sum E Tax Offset.
This offset is designed to prevent you from paying excessive tax when you receive a large back payment in one financial year for income earned in earlier years. Normally, all income is taxed in the year you receive it, which could push you into a higher tax bracket. The offset adjusts for this by approximating the tax you would have paid if the income had been spread across the years it relates to.
We recommend you seek independent taxation and financial advice at the time of completing your next tax return.
Foreign Residents
Please note, if you are a foreign resident receiving a Distribution Payment in this class action, you will need to complete an Australian Income Tax Return for the financial year you receive your Distribution Payment. We recommend you seek independent advice about the applicable tax rate in your circumstances, in particular, as a foreign resident whether you are exempt from the 2% Medicare levy.