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PAYG tax and superannuation of non-executive directors

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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.

Written by Panbo Ye

I help people discover POWERFUL unknowns in Tax Ideas | Wealth Strategies | Retirement Planning | Finance Solutions!

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