Q: A client is a chairman of a medium-sized not for profit (NFP) in the employment service area. The NFP received conflicting advice regarding the need for our non-executive directors (NED) to be treated as employees. Please clarify the situation regarding employee status and super contribution obligations of the organisation.
A: In determining whether an NED is an employee of an company, the factors in taxation ruling TR 2005/16 and superannuation Guarantee ruling SGR 2005/1 should be considered. However, irrespective of whether or not an NED is a director of a company, both PAYG tax and superannuation may apply to the remuneration paid to the director (TAA 1953 Sch 12-40(1); SGAA s12(2)). That is, the issue of whether the NED is or is not an employee may have no impact on whether tax or superannuation applies. It will apply regardless.