Superannuation entitlements for audit and risk committee members

There stills seems to be confusion regarding whether independent audit and risk committee members are entitled to superannuation in relation to remuneration received, commonly described as sitting fees.

Ultimately, whether an independent audit and risk committee member is eligible for superannuation will be governed by the nature of the agreement between the parties.

Adding to the confusion at present are draft guidelines dated December 2022, ‘Risk management and internal audit for local government in NSW’) issued by the NSW Office of Local Government. The draft guidelines suggest a superannuation entitlement exists for remunerated independent audit and risk committee members appointed pursuant to the NSW Local Government Act 1993.

The view taken in the the guidelines may have resulted from a ruling issued by the ATO in 2021 in relation to independent audit and risk committee members. The ATO ruling concluded (in the circumstances considered) that a superannuation entitlement exists under the Superannuation Guarantee (Administration) Act 1992 under both section 12(1) (common law employment) and section 12(3) (a contract wholly or principally for labour). The ATO ruling did not deal with section 12(9) which deals with office holders under a State law which could also extend to independent audit and risk committee members where such committees are established under a State law such as a Local Government Act.

The ATO ruling looked at scenario where a pre-qualification process occurred, whereby potential applicants for audit and risk committee appointments in a particular State could be approved and appointed to a panel from which organisations requiring committee members could make appointments.

Unfortunately some considerable confusion exists regarding:

• if there is a superannuation obligation, on what basis does it arise. If the basis is common law employment then additional obligations will arise (Pay As You Go withholding) and leave entitlements presumably result; and
• where sitting fees are paid to an entity as directed by the approved individual does this impact the outcome.

We will be monitoring this issue and hopefully further clarity will be available soon.

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