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Salary Sacrifice and Superannuation - New Protection for employees

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Devotee Registered Tax Practitioner

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I though Forum readers might like to see this news release from the Australian Bookkeepers Network, of which I'm a member:

 

Salary Sacrifice and Superannuation - New Protection for Employees

Subject to the passage of legislation, commencing 1 July 2018 employees who salary sacrifice superannuation are protected from having their Superannuation Guarantee (SG) entitlement reduced.

Before this date, salary sacrifice contributions – although made from an employee’s salary – could reduce an employer’s SG liability. Salary sacrificed amounts, if paid late, could also be offset against the SG amount due. Despite this, some employers still generously contributed the full 9.5% contribution calculated on the pre-sacrifice (gross) salary. However many did not.

To protect employees, from 1 July 2018, amounts that an employee salary sacrifices to superannuation cannot reduce an employer’s SG liability. Salary sacrificed amounts also do not form part of any late contributions an employer makes that are eligible to be offset against the SG liability. To avoid a shortfall for a quarter, an employer must contribute at least 9.5% of an employee’s Ordinary Time Earnings (OTE) base to a complying superannuation fund or retirement savings account (RSA). Under the new rules, an employee’s OTE base is comprised of their OTE and any amounts sacrificed into superannuation that would have been OTE, but for the salary sacrifice arrangement.

Example:

Jake has quarterly OTE of $22,000 which would ordinarily generate an entitlement to 2,090 in employer SG cpntributions ($22,00 x 9.5%). Hesalary sacrifices $1,000 a quarter, expecting his superannuation contributions to rise to $3,090 for that quarter.

Howevere, his employer uses the sacrificed amount ($1,000) to satisfy part of its mandated SG obligation, and only makes an additional contribution of $1,090.

Under the new rules, Kake's $1,000 sacrificed contribution will no longer reduce the employer's SG liability. The employer must therefore contribute an additional $2,090 on top of the $1,000 sacrificed by Jake.

However, where the amounts sacrificed are not OTE (Ordinary Time earnings), they are not added back to determine the employer's SG liability for the quarter. This includes overtime that has been salary sacrificed.

 

Kym Y -  CPA

Darwin

 

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Hi @DebbieAMM,

 

Welcome to the Community.

 

The Treasury Laws Amendment (Improving Accountability and Member Outcomes in Superannuation Measures No.... is currently before parliament. 

 

You can check the progress of the bill through the Parliament of Australia website.

 

Thanks, NicM.

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I'm new

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Hi Kim,

Do you know if this legislation was passed?  And if so, can you point me to further details?  ATO website still advises that sal sac amounts count towards SG obligations.

 

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Most helpful response

Community Support

Replies 0

Hi @DebbieAMM,

 

Welcome to the Community.

 

The Treasury Laws Amendment (Improving Accountability and Member Outcomes in Superannuation Measures No.... is currently before parliament. 

 

You can check the progress of the bill through the Parliament of Australia website.

 

Thanks, NicM.