New legislation impacts Super Guarantee obligations
03 December 2019
3
min read
Employers need to be alert to new legislation that comes into effect on 1 January 20201, which will prevent them from reducing their super guarantee obligations should an employee salary sacrifice part of their wage.
What has changed?
The Treasury Laws Amendment (2019 Tax Integrity and Other Measures No. 1) Act 2019 amends the Superannuation Guarantee (Administration) Act 1992 (SG Act) from 1 January 2020 to close a loophole used by some employers to reduce their super contributions for their employees, among a number of changes.
The changes to the SG Act will prevent employers from counting any salary sacrifice contributions made by employees towards their statutory Salary Sacrifice and Superannuation Guarantee Contributions (SGC) when meeting minimum superannuation payment obligations.
In short, an employer must pay a minimum 9.5% of an employee’s ordinary time earnings (OTE) as SGC.
Here’s an example of how it works
Sharon earns $2,000 a week and salary sacrifices $500 to her superannuation fund each week. Sharon's salary only comprises OTE amounts.
Sharon’s employer has been calculating their SG liability on the after-salary sacrifice wage per week of $1,500 ($2,000 - $500). This amounted to contributions totalling $142.50 ($1,500 × 9.5%) to be made to Sharon’s superannuation fund to satisfy the employer’s SG liability.
From 1 January 2020, Sharon’s employer must calculate the SG liability on her OTE base, which includes sacrificed OTE amounts. That means, by law, Sharon’s employer must contribute $190 to Sharon’s super fund ($2,000 × 9.5%). This is in addition to the $500 Sharon salary sacrifices each week.
This case study is provided for illustrative and educational purposes only and the members shown are not real. Additionally, figures may be rounded for ease of understanding. Members should seek advice from a qualified licensed professional, regarding their own circumstances.
Want to know more?
For more information about an employer’s Super Guarantee obligations check the ATO website here.
1. ato.gov.au/Business/Super-for-employers/In-detail/Salary-sacrifice/Salary-sacrificing-super---information-for-employers/, accessed 28 November 2019.