Your employees can ‘sacrifice’ part of their wages into super contributions under an agreement with you.
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 sacrifice. This means for the purposes of super guarantee (SG), the salary sacrificed amount will not count towards your super guarantee obligations.
In addition, the amount of super you are required to pay, to avoid the super guarantee charge will be 9.5% of the employee’s ordinary time earnings (OTE) base. The employee’s OTE base is the sum of the employee’s OTE and any sacrificed OTE amounts. Therefore, you must calculate the SG liability on the OTE base which includes sacrificed OTE amounts.
You now need to:
- Review your salary sacrifice arrangements, ensuring:
- Using your employee’s OTE base to calculate SG obligation
- Not counting salary sacrificed amounts toward the minimum amount of SG you have to pay
- Check that all of your systems correctly calculate your SG obligation in light of these changes.
Please contact us if you have any questions regarding your salary sacrificed super obligations
Author: Renee Larsen – this article appeared in our November 2019 newsletter