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  • Salary sacrificing super – information for employers

    An employee can 'sacrifice' part of their salary or wages into super contributions under an agreement with you. You then pay the sacrificed amount to your employee's super fund on their behalf.

    There may be benefits to both of you in that:

    • for your employee
      • salary sacrificing is a tax effective way of increasing their super, provided they stay within their contribution caps
       
    • for you
      • salary sacrificed super contributions aren't subject to fringe benefits tax
      • the contributions are tax deductible.
       

    To get these benefits, the contributions must be:

    It is advisable that you and your employee clearly state and agree on all the terms of any salary sacrifice arrangement. You should consult the Fair Work CommissionExternal Link before proceeding.

    Salary sacrifice contributions you make for an employee must be included on their annual payment summary as reportable employer super contributions.

    You don't have to offer or agree to salary sacrifice arrangements with your employees. You may wish to speak to a tax adviser about the implications for your business.

    Changes from 1 January 2020

    From 1 January 2020, salary sacrificed super contributions can't be used to reduce your super guarantee obligations, regardless of the amount your employee elects to salary sacrifice.

    This means the salary sacrificed amount does not count towards your super guarantee (SG) obligations.

    A further change is that the super guarantee will be 9.5% of the employee's ordinary time earnings (OTE) 'base'. The base is the sum of:

    • the employee's OTE
    • the amount salary sacrificed from the employee's OTE.

    You need to:

    • review your salary sacrifice arrangements to make sure you are:
      • using your employee's OTE base to calculate your SG obligation
      • not counting salary sacrificed amounts towards the minimum amount of SG you have to pay
       
    • check that all your systems correctly calculate your SG obligations.

    Example: Employer adjusts arrangement to ensure amounts salary sacrificed are now included in the employee's OTE base

    Sharon earns $2,000 a week and has an effective salary sacrifice agreement with her employer to sacrifice $250 to her superannuation fund each week. Sharon's salary only comprises OTE amounts.

    Sharon’s employer previously calculated his SG liability on Sharon's after salary sacrifice wage as follows:

    • $2,000 − $250 = $1,750
    • $1,750 × 9.5% = $166.25 SG liability

    From 1 January 2020, Sharon’s employer must calculate the SG liability on her OTE base which includes the salary sacrificed OTE amounts. The calculation is:

    • $2,000 × 9.5% = $190.00

    This is in addition to the $250 Sharon salary sacrifices each week.

    Sharon’s employer makes the following payments to her super fund:

    • salary sacrificed amounts of $250 each week (as per agreement)
    • SG contributions of $2,470 each quarter ($190 × 13 weeks)
    End of example

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      Last modified: 20 Dec 2019QC 17235