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Reportable employer super contributions |
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1. About this guide
As an employer, this guide will help you work out how much of the super contributions you make for your employee are reportable employer super contributions and how to keep appropriate records of those contributions.
This guide will also help you to work out:
- if the extra employer contributions are employee influenced
- what salary you should use when calculating your compulsory contributions
- what to do if you make employer contributions in excess of your compulsory contributions for administrative simplicity or where you can show that the employee did not or could not influence the extra contributions you made for them.
Some technical terms in this guide may be new to you. They are shown in bold when first used, and are explained in the list of definitions.
2. Paying super
2.1. Reporting super you pay for your employees
For the 2009–10 income year and all future years, if you make super contributions under a salary sacrifice arrangement or extra super contributions to a super fund for an employee, you may need to report those contributions on your employee’s payment summary.
These contributions are called reportable employer super contributions.
Reportable employer super contributions are not included in your employee’s assessable income. However:
- you must report them to us as part of your payment summary reporting
- your employee must report them to us in their income tax return
- reportable employer super contributions affect a range of government entitlements and obligations for individuals.
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You must keep records in enough detail to:
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2.2. Deciding if you are an employer
For the purposes of reportable employer super contributions you are an employer if you employ workers under a verbal or written employment contract on either a:
- full-time basis
- part-time basis
- casual basis.
You may also be considered an employer if you make payments to a person under a contract for labour.
If you are considered an employer under the super guarantee law, you will be considered an employer for the purposes of reportable employer super contributions.
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For more information about:
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2.3. Does it matter when your employee started working for you?
Employer super contributions you make for an employee can be reportable employer super contributions regardless of when any of the following occurred:
- you employed your employee
- you negotiated the industrial agreement under which your employee is paid
- you entered into a salary sacrifice agreement or similar arrangement with your employee.
2.4. What is the reporting period?
You must report all the reportable employer super contributions you make for an employee on their payment summary for the income year (1 July to 30 June).
Reportable employer super contributions are to be reported for the income year that the contribution relates to. This could be a different year to the one they are actually received by the super fund.
This will start for super contributions made for the 2009–10 income year and all future years.
3. What are reportable employer super contributions?
Reportable employer super contributions are those contributions you make for an employee where all of the following apply:
- your employee influenced the rate or amount of super you contribute for them
- the contributions are additional to the compulsory contributions you must make under any of the following
- super guarantee law
- an industrial agreement
- the trust deed or governing rules of a super fund
- a federal, state or territory law.
3.1. What does capacity to influence mean?
If you have an employee who enters into an arrangement with you to contribute more super than you are required to contribute for that employee, then that employee will be considered to have capacity to influence. 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 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 where they can directly negotiate or have an option to directly negotiate an employer super contribution in excess of the compulsory contributions that must be paid.
Example
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 employee’s salary to super.
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 employer’s obligations under super 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
- contributions that Tula had capacity to influence.
The charge percentage under super guarantee law is 9%. If Tula’s salary is $60,000, then the amount of reportable employer super contributions is 6% (the difference between 9% and the amount contributed, 15%) of $60,000; that is $3,600.
3.2. What about salary sacrifice arrangements?
Under an effective salary sacrifice arrangement, your employee agrees that you make extra super contributions for them in return for a reduced amount of salary. These extra contributions are reportable employer super contributions.
An effective salary sacrifice arrangement is an agreement where an employee agrees to forego part of their future salary or wages in return for you providing benefits of a similar value. You cannot enter into an effective salary sacrifice arrangement to substitute benefits for salary or wages your employee has already earned.
Employees can receive a range of benefits under an effective salary sacrifice arrangement. Generally, benefits provided to employees are subject to fringe benefits tax (FBT) and are already reported on the employee’s payment summary. These are called reportable fringe benefits. However, super contributions are not benefits that are subject to the fringe benefits rules and previously were not reported on an employee’s payment summary.
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For more information about reportable fringe benefits and what benefits need to be reported, refer to Fringe benefits tax: a guide for employers (NAT 1054). |
The new requirements to report the extra employer super contributions do not change how salary sacrifice arrangements or employer super contributions are treated. It is simply that extra contributions you make for an employee must be reported on your employee’s payment summary along with any reportable fringe benefits.
Example
Under Jill’s industrial agreement, her employer must contribute 10% of her ordinary time earnings (OTE) to a super fund.
Jill has a long standing agreement with her employer to salary sacrifice an extra $10,000 of her salary to the same super fund.
Only the $10,000 additional portion of the employer contributions are reportable employer super contributions that Jill’s employer must report on her payment summary. This is because the following applies:
- Jill directly influenced the amount of extra super her employer pays for her
- the contributions reduce Jill’s assessable income.
3.3. Are reportable employer super contributions just salary sacrifice?
If you make an employer contribution to a super fund for an employee and the amount would have otherwise been income, it is a reportable employer super contribution. If you can show that it was a compulsory contribution or it was not influenced by your employee, part or all of the contribution will not be a reportable employer super contribution.
Example
Mike pays his employees a bonus each year if they meet their performance targets.
Under a long standing agreement, one of Mike’s employees has elected to have Mike pay the amount of any bonus into their super fund. If a bonus is payable and Mike pays the bonus into his employee’s super fund, the amount will be a reportable employer super contribution.
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For more information about salary sacrificing and super, refer to Employer superannuation essentials |
4. What are not reportable employer super contributions?
4.1. Contributions that are not reportable employer super contributions
If you can show your employee did not and could not influence the amount of super you contributed for them, they are not reportable employer super contributions.
Contributions you make that are not reportable employer super contributions are any compulsory contributions that you must make for your employee. This includes contributions:
- you must make under a collectively negotiated industrial agreement or under super guarantee law
- you make to meet your obligations under federal, state or territory law
- you must make under the trust deed or governing rules of a super fund.
Example
Under super guarantee law, Anthony’s employer contributes 9% of his OTE to his industry super fund.
His employer does not have to report these payments on Anthony’s payment summary because they are not reportable employer super contributions.
4.2. Contributions from your employee's after-tax income
If your employee makes super contributions from their after-tax (net) income, these contributions are not reportable employer super contributions. This is the case even if you deduct the amounts from your employee’s take-home pay and forward the amount to their super fund on their behalf.
Example
Alla is a business operator who employs three workers. Jo, one of her employees, has asked Alla to pay $50 per fortnight to her super fund from her after-tax pay so she can increase her super savings.
Although Jo has directly influenced the amount of super Alla pays on her behalf, the additional $50 Alla pays is not a reportable employer super contribution because it comes from Jo’s after-tax income. The amounts are not employer super contributions, they are a part of Jo’s assessable income. The contributions are Jo’s personal super contributions.
4.3. Contributions you make under industrial agreements
The super contributions you make for an employee are not reportable employer super contributions if all of the following apply:
- you make the contributions to meet the terms of an industrial agreement
- the employee did not directly influence the terms of the agreement.
Example
Amanda operates a business and employs 20 workers. Under their industrial agreement Amanda must contribute 10% of her employees’ OTE to a super fund.
Apart from voting on the agreement, Amanda’s employees have no influence over the amount of super she contributes. This means the super contributions Amanda makes for her workers are not reportable employer super contributions.
4.4. Contributions you make under an individual employment contract
If you have employees on individual employment contracts, they will generally be considered to have capacity to influence amounts contributed for them that are greater than the minimum required to meet your obligations. For example, contributions that are greater than the minimum amount required under super guarantee law or a fund’s trust deed.
This is the case unless you can show that either:
- the extra contributions are made for administrative simplicity
- a documented policy is in place that does not allow an employee to influence the contributions you make on their behalf.
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For more information, see Making extra contributions where you can show your employee had no influence. |
Example
Ian is an employee of XYZ Pty Ltd. While negotiating his individual common law employment contract, XYZ Pty Ltd contracts to pay super contributions for Ian at the rate of 15% of his salary.
XYZ Pty Ltd has no policy in regard to the employer contributions it pays for its employees. It allows employees to negotiate any rate of employer contribution they wish in excess of 9% in exchange for a reduced salary. Ian and the other employees of XYZ Pty have contributions made on their behalf at varying rates.
XYZ Pty Ltd must record the extra contributions made for Ian as reportable employer super contributions. Ian’s OTE are the same as his salary. The amount recorded is 6% of Ian’s salary as this is the amount that is additional to the minimum contributions XYZ Pty Ltd must make under super guarantee law.
4.5. Contributions you make under a fund's rules or under a law
If you have to make contributions for an employee based on an amount set by a law or their super fund’s rules or trust deed, those contributions are not reportable employer contributions. This is the case even if the amount you must contribute is greater than the minimum amount you must contribute under super guarantee law.
What if the contributions exceed the minimum fund requirements?
If the contributions you make exceed the minimum fund requirements, any additional contributions made on your employee’s behalf are reportable employer super contributions if they are not made from their net take-home pay.
Example
Jamie is a member of a public sector super scheme. Under the scheme:
- his employer must make contributions of 15% of his super salary on his behalf
- Jamie must also contribute 3% of his after-tax income.
Jamie can elect that an additional amount between the rate of 1% and 10% of his super salary be contributed to the scheme for him by his employer. He elects for his employer to contribute an additional 5% above the minimum compulsory contribution mandated by the scheme rules.
Jamie’s employer records the extra 5% as a reportable employer super contribution. This is the case even if 5% was the default option and Jamie did not elect to change the amount to nil. This is because Jamie has the capacity to influence the extra employer contributions.
4.6. Contributions you make to a defined benefit fund
The employer super contributions you make to a defined benefit fund for your employees with defined benefit interests in the fund can vary depending on the fund. The amount you must contribute for defined benefit members is usually decided by the fund’s actuary, not your employee. These contributions are made by you to a defined benefit fund to meet the liabilities of the defined benefit members as a whole. As a result, the contributions you make to a defined benefit fund for these members would generally not be reportable employer super contributions where the contribution is not allocated to a particular member.
However, if your employee can elect for you to make extra contributions to their account from their pre-tax income, these extra amounts will be reportable employer super contributions.
If your employee also has an accumulation account in the defined benefit fund (or any other fund) and you make extra contributions to that account for your employee, these will be reportable employer super contributions.
Example
Danny works for a large company and is a member of a defined benefit super fund. Danny accrues benefits that increase with his length of service. The company makes contributions to the fund according to the fund rules. These employer contributions are worked out by the fund’s actuary.
The amount the company must contribute to the fund, as decided by the fund’s actuary, is not a reportable employer super contribution as Danny has no influence over or choice about this amount.
Danny can choose to contribute between 1% and 5% extra from his pre-tax income. Danny completes an election form with his employer to contribute an extra 5%. This amount goes to Danny’s account within the defined benefit fund. This extra amount is a reportable employer super contribution and must be reported on Danny’s payment summary.
4.7. Making extra payments for administrative simplicity
Some super contributions you make are not reportable employer super contributions, even if they are additional to your compulsory contribution amount.
This is the case for an employee when you can show both of the following:
- you made the extra contributions for administrative, payroll simplicity or other reasons
- your employee had no influence and could not have had influence over whether or not you made the additional contributions.
Example
Vangie is a business operator who employs several full-time and casual employees. Some of Vangie’s casual employees rarely earn more than $450 in any given month, which means Vangie does not have to make any contributions on their behalf under super guarantee law.
Vangie’s payroll system automatically calculates super contributions for her employees at the rate of 9% of the total salary or wages she pays them, even if they earn less than $450 in any month. This means Vangie is making super contributions for some employees even though she doesn’t have to. She does this because it is easier to do so under her payroll system.
Vangie’s employees have no choice about how much super Vangie contributes on their behalf, so the contributions she makes are not reportable employer super contributions.
4.8. Making extra contributions where you can show your employee had no influence
There may be circumstances where you are paying more than is required because of an employer policy or similar arrangements. This may be the case with employees who are employed under either:
- collectively negotiated industrial agreements
- single employment contracts.
Example
ABC Pty Ltd (ABC) employs a range of different types of workers on individual contracts and collective industrial agreements. ABC has always paid employer contributions at the minimum rate of 12% of salary regardless of whether the employee is on an individual contract or a collectively negotiated agreement. Employees are not able to negotiate an employer contribution rate lower than 12%.
The company policy is long standing and is documented in ABC's record keeping system. No employee is receiving less than 12% employer contribution support.
ABC must document how it worked out that the employees did not influence the contributions. If employees do have the power to vary their employer contribution rate, the amounts over any compulsory contributions made will be reportable employer super contributions.
5. Calculating compulsory employer super contributions
5.1. What salary or OTE amount should you use?
Reportable employer super contributions do not change how you currently work out salary or OTE for your employees.
You work out your compulsory contributions for your employees as you normally do to meet your legal obligations under, for example:
- super guarantee law
- an industrial agreement that specifies what salary to use.
You may base your compulsory contributions on a salary that is slightly higher than OTE. This may be because of the terms of the industrial agreement under which the compulsory contributions for your employees are worked out. This also may be due to administrative simplicity.
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For more information, see Making extra payments for administrative simplicity. |
Example
Alistair employs Jess under an industrial agreement. Under the terms of the industrial agreement, Alistair must contribute to super an amount of 9% of each employee’s total remuneration. Where an employee has overtime their total remuneration may be greater than the OTE used under the super guarantee law.
Jess has OTE of $59,000. However, at the end of the year Jess has actually received $60,000 as she has also earned $1,000 from occasional and irregular overtime.
Alistair must contribute 9% of $60,000 to super for Jess under the industrial agreement. Even though this amount is greater than the minimum amount that Alistair would need to contribute under super guarantee law, Jess has no reportable employer super contributions. The compulsory contributions for Jess are calculated under the industrial agreement. Jess is not able to influence the amount of these contributions.
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For more information about how to work out the amount of super you must pay under super guarantee law, refer to Superannuation guarantee – how to meet your super obligations. |
5.2. How do you work out compulsory contributions if there is no defined salary?
You will still need to identify the amount of compulsory contributions and work out if any amount you contribute in excess of these for an employee are reportable employer super contributions.
Some employees, for example commission-based sales staff, may not have a defined salary. You may make one payment for the total amount of super you contribute that incorporates extra super contributions. This means you will need to calculate what portion of the total employer contribution is a reportable employer super contribution.
Example
Rob operates a real estate business and hires Marcus. Marcus is unsure of how much he will make in any given year, but he wants to save more than the minimum for his retirement. Marcus requests that 20% of his commission earnings be paid to a super fund on his behalf.
Rob pays Marcus monthly:
- 20% of his commission earnings are sent to his super fund
- 80% are paid to him less PAYG withholding.
At the end of the income year Marcus’s sales commissions total $100,000. Rob has made employer super contributions totalling $20,000 and has paid Marcus $80,000 (less PAYG withholding).
Rob will need to work out which part of the super contribution Marcus influences so he can report this amount as Marcus’s reportable employer super contributions. Rob does this by working out the contributions he would have made for Marcus had he not asked him to contribute more than the minimum required under the super guarantee law.
To work this out Rob goes through the following steps:
Step 1
Marcus’ commission earnings of $100,000 is multiplied by 100/109:
$100,000 * 100/109 = $91,743
The minimum amount Rob needs to contribute for Marcus in order to meet his obligations under super guarantee law is:
$100,000 – $91,743 = $8,257.
Step 2
Rob then subtracts the $8,257 from the total employer super contributions actually made.
$20,000 - $8,257 = $11,743.
Step 3
Rob will report the extra $11,743 as reportable employer super contributions and the $80,000 as gross payments on Marcus’s payment summary.
Rob’s payroll system calculates salary and super guarantee contributions in this way for all employees. Rob will keeps records of how he calculated the reportable employer super contributions.
6. Record keeping and payment summaries
6.1. Records you must keep
You must keep enough records to prove whether or not your employee influenced the super contributions you made on their behalf. These records include:
- information on how you calculated reportable employer super contributions
- information on how you calculated the employee-influenced portion of the total employer contribution
- information on how you calculated your employee’s salary or OTE
- copies of relevant salary sacrifice agreements
- copies of relevant industrial agreements.
- for five years after they are prepared, obtained or the transactions completed, whichever occurs last
- in English, or in a form we can access and understand in order to work out the tax you are liable to pay.
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For more information about record keeping, refer to Record keeping essentials. |
Electronic record keeping
If you choose to keep your business records electronically, they must be in a form we can readily access and understand.
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For more information about keeping electronic records, refer to Taxation Ruling TR 2005/9 Income tax: record keeping – electronic records. |
6.2. Payment summaries
New payment summaries will be available for the 2009–10 income year. They will include a label to show reportable employer super contributions.
You must include all reportable employer super contributions you make for an employee on their payment summary. Anyone with a reportable employer super contribution amount must be issued with a payment summary.
If you make reportable super contributions, you must provide them with a payment summary even if you have not paid them salary or wages.
If the payment of reportable employer super contributions is paid by one of your associates, a payment summary is still required to be issued. The payment summary must be issued by your associate.
Example
Sharon is employed by LBM Ltd. However LBM Ltd has insufficient funds to pay Sharon the $10,000 in salary she is due to be paid.
LBM Ltd‘s directors arrange for an associated business to make the payment. In addition, Sharon and LBM Ltd have an effective salary sacrifice arrangement whereby all her salary is paid into a super fund.
The directors of the associated business PDY Ltd contribute the amount to a super fund on Sharon’s behalf. PDY Ltd, as the payer, is responsible for working out the amount of reportable employer super contributions.
PDY Ltd must supply Sharon with a payment summary showing the reportable employer super contribution amount. They must also give an annual report to the Tax Office by 14 August after the income year that shows the reportable employer super contributions made for Sharon.
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For more information about payment summaries, refer to PAYG payment summary – individual non-business (NAT 0046). |
6.3. Correcting errors on payment summaries
You can make a correction to a payment summary you have already issued if you have:
- forgotten to include the reportable employer super contributions
- included an incorrect amount of reportable employer super contributions.
You must complete a new payment summary and mark the ‘amending a payment summary’ box with an ‘X’.
When you complete an amended payment summary, you must:
- complete the ‘Reportable employer super contributions’ label with the appropriate amount
- complete the payee, payment and payer information as it was on the original payment summary
- send it to us to the applicable address on the PAYG payment summary statement
- give a copy to your employee.
If your employee has already lodged their tax return, they must request an amendment to their reportable employer super contributions amount. We recommend they keep a copy of the amended payment summary for their records.
7. How your employees are affected
Although you must include all reportable employer super contributions you make for an employee on their payment summary, you do not include these contributions in your employee’s gross income.
Reportable employer super contributions are not included in your employee’s assessable income. However, these contributions are included in the income tests for the following benefits and obligations we administer:
- Medicare levy surcharge threshold calculation
- Medicare levy surcharge (lump sum payment in arrears) tax offset
- all dependant tax offsets
- senior Australians tax offset
- pensioner tax offset
- mature age worker tax offset
- spouse super contributions tax offset
- super co-contributions
- deduction for personal super contributions
- Higher Education Loan Programme (HELP) and Student Financial Supplement Scheme (SFSS) repayments.
The new law also affects a range of Centrelink and Child Support benefits and obligations.
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For more information about how these changes affect Centrelink and Child Support, visit the:
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7.1. What your employees need to do
Your employees must copy the reportable employer super contribution amounts from their payment summary to their income tax return. We will calculate their entitlements by including the reportable employer super contribution in certain income tests.
From 1 July 2009, your employees may need to review their entitlement to the range of benefits and obligations listed above to see if they are still eligible for these entitlements.
Your employees may need to provide new withholding declarations to ensure that amounts of tax withheld from their salary or wages and other income during the income year best meet their expected tax liability, taking into account the changes to income tests.
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As reportable employer super contributions may affect employee obligations and entitlements, we recommend you discuss these contributions with them. |
7.2. Examples of how benefits and obligations are affected
7.2.1. Example 1: dependent spouse tax offset
Toni and Dana are in a de-facto relationship. Dana is on unpaid leave. Toni wants to claim the maximum dependent spouse tax offset for Dana in her 2009–10 income tax return. The dependent spouse rebate separate net income threshold for the 2009–10 income year is $8,917.
While Dana has no salary or wage income, her employer has made $10,000 in reportable employer super contributions for her during the 2009–10 income year.
As Dana had no other taxable income or fringe benefit amounts for the income year, her taxable income is $0, but her adjusted taxable income (ATI) is $10,000. This is because reportable employer super contributions are included in the income test.
Therefore, Toni is ineligible for the maximum dependent spouse tax offset as Dana’s ATI is more than the dependent spouse income threshold for the 2009–10 income year.
7.2.2. Example 2: Medicare levy surcharge
Jo has a taxable income of $70,000 and reportable employer super contributions of $30,000. Lee, Jo’s spouse, has a taxable income of $60,000 and reportable employer super contributions of $10,000. This means their total family income is $170,000. Neither Jo nor Lee has private patient hospital insurance.
The couple’s family threshold for the surcharge is $140,000. If their reportable employer super contributions had not been taken into account, their combined income would have been $130,000 and they would not have had to pay the Medicare levy surcharge. However, with their reportable employer super contributions, their family income exceeds the surcharge threshold and they are both liable to pay the Medicare levy surcharge. This means:
- Jo has to pay a surcharge of $700; that is, 1% of $70,000
- Lee has to pay a surcharge of $600; that is, 1% of $60,000.
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Although reportable employer super contributions are included in calculating the Medicare levy surcharge threshold, the actual surcharge is only applied to taxable income and any applicable reportable fringe benefits. |
7.2.3. Example 3: super co-contributions
Raji’s assessable income is $30,000 and her employer makes reportable employer super contributions of $40,000 on her behalf. Raji also makes a personal contribution of $1,000 from her after-tax income to her super fund.
For the 2009–10 income year, Raji’s total income for the purposes of calculating her co-contribution is the sum of her assessable income, reportable fringe benefits and reportable employer super contributions, less any business deductions. This means Raji’s total income for the 2009-10 income year is $70,000; that is, $30,000 + $40,000 = $70,000.
For the 2009-10 income year, Raji will not be entitled to a super co-contribution from the government assuming that the co-contributions higher income threshold for that year is less than $70,000. However, if Raji had no reportable employer super contributions, her assessable income would have been $30,000 and she may have been eligible for a co-contribution.
7.2.4. Example 4: deduction for personal super contributions
Ted is an employee and has entered into a salary sacrifice arrangement with his employer. They have agreed that his employer will contribute his entire salary of $30,000 to a super fund on his behalf in return for Ted receiving no salary. Therefore, Ted’s salary is $0.
Ted’s employer also pays a $2,700 super contribution for him based on his pre-salary sacrifice salary. For the 2009–10 income year Ted has no salary or wages. Ted’s employer is still required to report a $30,000 reportable employer super contribution on his payment summary.
In the 2009–10 income year Ted also receives $40,000 in assessable income from a trust distribution. Ted also makes a personal contribution of $5,000 to his super fund. Ted plans to claim $5,000 as a deduction for the personal contribution to super in his tax return so that his taxable income will be reduced.
Ted needs to calculate whether he meets the 10% test for deducting personal super contributions. His total income for the test is the sum of his:
- assessable income
- reportable fringe benefits
- reportable employer super contributions.
For Ted this is $70,000; that is $40,000 from the trust distribution plus $30,000 reportable employer super contributions. The reportable employer super contributions of $30,000 are from activities as an employee and are greater than 10% of $70,000. Therefore, Ted is not entitled to claim a tax deduction for any personal contributions he makes.
8. Definitions
Accumulation funds
This is a fund to which you contribute regular payments. On retirement, your employee receives the accumulated contributions you have made, plus any additional contributions they may have made, plus interest (less management fees, taxes, etc).
Adjusted taxable income (ATI)
This is the income test used to calculate eligibility for the dependency tax offsets. Centrelink also use this test to calculate, for example, family benefits. From 1 July 2009, this test will include reportable employer super contributions.
Assessable income
This is a person’s ordinary income and statutory income before deductions are taken into account. Reportable employer super contributions do not form part of a person’s assessable income, but they are added to a number of income tests that use expanded definitions of income.
Compulsory contributions
Compulsory contributions are employer super contributions you must make to meet your obligations under any of the following:
- super guarantee law
- an industrial agreement
- the trust deed or governing rules of a super fund
- a federal, state or territory law.
Defined benefit fund
This is a super fund with at least one defined benefit member. A defined benefit member is a member whose entitlement to super benefits from the fund is defined by either:
- a reference to salary
- a specified amount
- specified conversion factors.
Contributions into the fund for the defined benefit members are not paid into the fund or accumulated in the fund for any individual member. They are paid into and accumulated in the fund in the form of an aggregate amount.
Employer contribution
This is a contribution you make for your employee to a super fund. These are deductible (subject to certain rules) to you and are assessable contributions to the super fund.
Employer contributions are not assessable income to your employee. This means that they are not:
- included in the gross payments on a payment summary
- subject to PAYG withholding tax.
Higher Education Loan Programme (HELP)
From 1 January 2005, HELP replaced the Higher Education Contribution Scheme (HECS). If a payee already has an accumulated HECS debt, the debt becomes an accumulated HELP debt on 1 June 2006.
Industrial agreement
Industrial agreement means either:
- an Australian law
- an award
- an order
- a determination
- an industrial instrument in force under an Australian law.
Income tests
Many government benefits paid by us or Centrelink are income tested. The income tests vary depending on the entitlement.
Generally, an income test will consist of two or more aspects. The first aspect is a threshold that is an income amount at which the entitlement or concession is reduced or withdrawn. The second aspect is the items that are included in the income test.
Reportable employer super contributions will not be taxed directly, but they will be included in certain income tests. This could mean an individual is not entitled to a tax offset or a government entitlement.
Non-arm’s length dealings
An indicator of a non-arm’s length arrangement will be where you and your employee are related and they negotiate employer contributions in excess of what the other employers would ordinarily have contributed for them.
Ordinary time earnings (OTE)
OTE are generally what your employees earn for their ordinary hours of work, including:
- over-award payments
- commissions
- allowances
- paid leave.
Personal deductible super contributions
These are the personal super contributions that a person claims as an income tax deduction on their tax return if they meet certain eligibility criteria. As a general rule, employees are not entitled to claim an income tax deduction for personal super contributions in an income year where more than 10% of their income is attributable to activities as an employee.
Personal super contribution
These are personal contributions your employee pays into their super fund from their after-tax (net) income.
Reportable employer super contributions
This is the amount of employer super contributions influenced or able to be influenced by your employee that are:
- above your compulsory contributions
- not included in your employee’s assessable income.
Reportable fringe benefits amount
If you provide fringe benefits with a total taxable value of more than $2,000 to an employee in an FBT year, you must report the grossed-up taxable value of the benefits on the employee’s payment summary.
These are called reportable fringe benefits.
Reportable super contributions
Reportable super contributions are the sum of reportable employer super contributions and personal deductible super contributions.
Salary or wages
Under super guarantee law, salary or wages generally includes any payment you make to a person in return for either:
- work
- services
- labour under a contract.
It can include commissions.
Student Financial Supplement Scheme (SFSS)
The SFSS is a voluntary loan scheme to help tertiary students cover their expenses while studying. Five years after the loan is taken out, we take responsibility for collecting the balance of the outstanding loan. The loan becomes an accumulated Financial Supplement debt.
On 31 December 2003, the scheme closed and no new loans are being issued. There are no changes to the collection of existing Financial Supplement debt.
Super contribution
This is a contribution made to a super fund or a retirement savings account (RSA) for the purposes of providing super benefits for a person. This is regardless of whether the benefits are payable to the person’s dependants if the person dies before or after becoming entitled to receive the benefits.
Super guarantee law
This is the Superannuation Guarantee (Administration) Act 1992. This law sets out the minimum amount of employer super contributions you must make for an employee.
The minimum amount of employer super contributions is currently 9% of the employee’s OTE.
Super fund
A super fund for the purposes of this guide includes:
- a super fund
- a Retirement Savings Account (RSA).
RSAs are offered by approved financial institutions. Just like complying super funds, they accept super contributions for account holders, and provide benefits upon retirement or death.
9. More information
To order a printed copy go to www.ato.gov.au/onlineordering or phone the Publications Distribution Service on 1300 720 092.
For more information phone our
- superannuation information line on 13 10 20, or
- contact our small business information line on 13 28 66 between 8.00am and 6.00pm, Monday to Friday.
If you do not speak English well and want to talk to a tax officer, phone the Translating and Interpreting Service on 13 14 50 for help with your call. If you are calling from overseas, phone +61 3 9203 4027.
If you have a hearing or speech impairment and use a TTY or modem, phone the National Relay Service on 13 36 77. For 1800 toll-free numbers, phone 1800 555 677 and quote the number you need. If you are calling from overseas, phone +61 7 3815 7799.
If you have a speech impairment and do not use a TTY or modem, phone the Speech to Speech Relay Service on 1300 555 727. For 1800 toll-free numbers, phone 1800 555 677 and quote the number you need. If you are calling from overseas, phone +61 7 3815 8000.
Last Modified: Friday, 22 May 2009
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