Less sacrifice in future superannuation contributions? | KPMG | AU
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Less sacrifice in future superannuation contributions?

Less sacrifice in future superannuation contributions?

Hayley Lock discusses proposed changes to salary sacrificed super contribution rules, and how employers may be affected.

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Partner, Employment Tax

KPMG Australia

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Coinciding with the birthday of yours truly, on 14 September the federal government took a step forward in providing a present for all employees – the introduction of legislation aimed at increasing the integrity of the process surrounding salary sacrificed superannuation contributions.

While a positive outcome for employees, all employers will need to carefully check their arrangements or face potential Superannuation Guarantee (SG) Charge penalties.

The Bill will specifically impact those employers who allow employees to sacrifice salary in return for superannuation contributions, and who then either:

  1. ‘Count’ the salary sacrificed contributions towards the employers own SG obligation; and/or
  2. Re-calculate their statutory SG obligations on the basis of the post sacrifice (reduced) salary amount.

An example to illustrate:

  Scenario 1: no salary sacrifice Scenario 2: Salary sacrifice under current legislation Scenario 3: Salary sacrifice under proposed legislation
Employee salary  $8,000 $7,500 $7,500
Agreed salary sacrificed superannuation  N/A $500 $500
Superannuation Guarantee obligation  $760 [$8,000 * 9.5%] $713 ($7,500 * 9.5%) $760 ($8,000 * 9.5%)
Total superannuation contribution $760 [funded by employer] $713 [$500 funded by employee; $213 funded by employer] $1,260 [$500 funded by employee; $760 funded by employer]

 

Now importantly, we are not suggesting that all employers operate under Scenario 2 and not Scenario 3 already. What we are pointing out is that under the current SG legislation it is essentially the employer’s choice, and legally, they can operate per Scenario 2. From 1 July 2018, the government will no longer allow that choice and everyone will have to comply with Scenario 3.

You might know your salary sacrifice policy already complies with Scenario 3, but are you 100 percent sure that your systems and processes do? Time to check! 

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