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Important Changes to Salary Sacrificing Super

There’s been an important change to employee super guarantee calculations, in relation to employees who salary sacrifice part of their wage or salary into super, resulting in paying less tax. The following information is an update for employers. Please contact us if you would like to chat.

What is it?

Salary sacrificing super is when an employee can 'sacrifice' part of their salary or wages into super contributions under an agreement with you. You then pay the sacrificed amount to your employee's super fund on their behalf.

There may be benefits to both of you:

  • For your employee:
Salary sacrificing is a tax effective way of increasing their super, provided they stay within their contribution caps
  • For you:
Salary sacrificed super contributions aren't subject to fringe benefits tax,
The contributions are tax deductible.

To get these benefits, the contributions must be made under an “effective salary sacrifice arrangement” to a complying super fund.

Why?

Currently you can choose to reduce the super guarantee obligations for the salary sacrificed super amount, which reduces the amount of super guarantee you need to pay.

From 1 January 2020 salary sacrificed super contributions cannot be used to reduce your super guarantee obligations, regardless of the amount your employee elects to salary sacrifice. This means for the purposes of super guarantee, the salary sacrificed amount will not count towards your super guarantee obligations.

The amount of super you are required to pay will be 9.5% of the employee's ordinary time earnings (OTE) base. The employee's OTE base is the total of the employee's OTE and any sacrificed OTE amounts.

When?

This came into effect from 1 January 2020.

Who does it affect?

Any employee with a salary sacrifice arrangement with you.

You should know:

You don't have to offer or agree to salary sacrifice arrangements with your employees. You may wish to speak to a tax adviser about the implications for your business.

What you need to do:

  1. Review your salary sacrifice arrangements, ensuring from 1 January 2020:
    1. You are using your employee's OTE base to calculate your SG obligation
    2. You are not counting salary sacrificed amounts towards the minimum amount of SG you have to pay
  2. Check that your payroll software correctly calculates your Super Guarantee obligation in light of these changes.
  3. Contact your payroll adviser for assistance.
  4. It is advisable that you and your employee clearly state and agree on all the terms of any salary sacrifice arrangement. You should consult a HR expert or Fair Work before entering into an agreement with your employee.

What’s next?

You can find more information on the ATO’s website, but if you have any questions at all, please get in touch with us. We stay on top of updates like this and help you navigate any changes with ease.
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