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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:

    • For your employee    
      • Salary sacrificing is a tax effective way of increasing their super, provided they stay within their contribution caps.
      • Salary-sacrificed super contributions aren't subject to fringe benefits tax.
    • For you    
      • Salary-sacrificed super contributions to an employee's fund under an agreed effective salary sacrifice arrangement are counted as employer contributions.    
        • This means, for the purposes of super guarantee, the salary sacrificed amount counts towards your super guarantee obligations. However, the agreement may specify that you continue to pay super at the pre-sacrifice level.
        • It is advisable that you and your employee clearly state and agree on all the terms of any salary sacrifice arrangement as some awards or agreements may specify that you continue to pay super at the pre sacrifice level.
        • You should consult the Fair Work CommissionExternal Link before proceeding.
      • The contributions are deductible.

    To get these benefits, the contributions must be made under an 'effective salary sacrifice arrangement' to a complying super fund.

    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.

    Note: From 1 July 2017 the 10% maximum earnings test will be abolished from the personal superannuation contributions deductions eligibility criteria. This means you may see an increase in employees opting out of their salary sacrifice agreements. If your employees opt out, you must ensure you are paying them the required superannuation guarantee entitlements.

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      Last modified: 19 Feb 2018QC 17235