Does Salary Sacrificing Superannuation affect your Employer SGC responsibilities?

CURRENT AS AT 23 December 2019

Up till now, when an employee salary sacrificed some of their salary, the employer could work out what 9.5% Super Guarantee (SG) they had to pay for the employee on the net salary, after salary sacrificing is taken off. From 01st January 2020 this will change. From that date, salary sacrificed super contributions cannot be used to reduce the base on which employer super guarantee obligations are calculated, regardless of the amount the employee elects to salary sacrifice.

 

The amount of super that employers needs to pay is 9.5% of the employee’s ordinary time earnings base (sum of the employee’s OTE and any sacrificed OTE amounts), without taking into account any amounts they salary sacrifice.

 

If you have salary sacrifice arrangements, you will need to:

 

·         review the salary sacrifice arrangements that are currently in place, ensuring:

o   the employee’s OTE base is used to calculate the SG obligation

o   not count the salary sacrificed amounts towards the minimum amount of SG needing to be paid

·         check that the payroll system correctly calculate the SG obligation in light of these changes (in Xero you just needed to untick the box – reduces SGC)

 

For more information:

 

https://www.ato.gov.au/Business/Super-for-employers/In-detail/Salary-sacrifice/Salary-sacrificing-super—information-for-employers/

 

Despite all of this, the limit on concessional contributions of $25,000 per year is still in place so the maximum super for each individual, whether SG or salary sacrifice, is still limited to a total of $25,000.

 

As always, if you have any questions don’t hesitate to contact your client manager to discuss.

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