If you have an employee who enters into an arrangement with you to contribute more super than you are required to, then that employee will be considered to have 'capacity to influence' the amount of contributions made. The employee's capacity to influence will be shown by:
- your relationship with the employee
- the involvement of your employee in the negotiations concerning the terms of any industrial agreement governing the super contributions
- the size of the amount contributed for your employee, relative to the compulsory contributions you are required to make
- the super contribution arrangements you have in place for other employees
- any non-arm's length dealings.
Generally, an employee will not be taken to have the capacity to influence the amount of super contributions you make on their behalf where they simply vote for a collective agreement, or are part of a group that negotiates a collective agreement with you.
Your employee will be taken to have influenced the amount of the contributions you make on their behalf where they can directly negotiate, or have an option to directly negotiate, an employer superannuation contribution in excess of the compulsory contributions.
Example: Employee influence
Tula is an employee of MGK Pty Ltd. Tula's employment conditions are governed by an industrial agreement that was negotiated between Tula and the other employees of MGK Pty Ltd. The other employees are Tula's husband Tony, and their adult children, Michael and Rena. There was no external involvement in the negotiations of the agreement and it was not made at arm's length. The agreement requires MGK Pty Ltd to contribute an amount equal to 15% of their employees' salary to superannuation.
As the employer contributions made on behalf of Tula and her fellow employees are required under the terms of an agreement that was not negotiated at arms' length, Tula had capacity to influence the contributions. MGK Pty Ltd must report the difference between the minimum amount required to be made to meet their obligations under the superannuation guarantee law and the amount paid under the industrial agreement.
This is because the contributions made on behalf of Tula and her fellow employees are:
- required under the terms of an agreement that was not negotiated at arm's length, and
- contributions that Tula had capacity to influence.
Under the superannuation guarantee law, the charge percentage is 9% of the ordinary time earnings of an employee. If Tula's ordinary time earnings are $60,000, then the amount of reportable employer superannuation contributions is 6% of $60,000, or $3,600 (the 6% applied is the difference between 9% and the contributed 15%).
Example 1: Employee influence
Under Jill's industrial agreement, she is required to contribute 6% of her ordinary time earnings to an industry super fund. Because Jill can make the contribution from either her pre-tax or post-tax income, she has decided to make the contribution from her pre-tax income.
While Jill's contribution is in accordance with her industrial agreement, she has the capacity to influence the way that the amount is contributed so that her assessable income will be reduced. This amount will be a reportable employer superannuation contribution.
Example 2: Employee did not influence
Trevor is an employee of TKY Pty Ltd. Trevor's employment conditions are governed by an industrial agreement that is collectively negotiated between employees and TKY.
The existing agreement will soon expire and Trevor has been nominated as a bargaining representative on behalf of TKY employees. Trevor consulted with employees and, among other improvements, employees wanted an increase in super contributions to match their colleagues in other companies. The majority of employees wanted an additional 2%, which would increase the employer super contributions from the minimum 9% to 11%.
Negotiations commenced and Trevor presented the changes sought by the employees. Trevor was successful in obtaining an increase in employer super contributions to 11%. All negotiations were at arm's length and, although Trevor was involved and will benefit from the increased employer super contribution, the additional 2% will not be reportable employer superannuation contributions for Trevor because he did not directly influence the contribution amount. The contribution amount was collectively negotiated between the employer and the employees. The additional 2% super contribution will not be reportable employer superannuation contributions for any employees of TKY Pty Ltd as it is part of the compulsory 11% employer super contribution under the terms of the industrial agreement.
Sections within What are reportable employer superannuation contributions?
Last Modified: Monday, 5 December 2011