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  • Identify reportable employer super contributions

    Employers who make extra super contributions for their employees must report these through Single Touch Payroll (STP) or on the employee's annual payment summary.

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    Reportable contributions

    Reportable employer super contributions (RESC) are not included in your employee's assessable income. They do not affect the way you calculate super contributions for your employees.

    The following employer super contributions are reportable:

    • additional contributions as part of an employee's individual salary package
    • additional contributions under a salary sacrifice arrangement
    • pre-tax amounts paid to an employee's super fund at the employee's direction, such as directing an annual bonus into super.

    You must report extra contributions if:

    • they are in addition to the compulsory contributions you must make under
      • super guarantee
      • a collectively negotiated industrial agreement
      • the rules of a super fund
      • federal, state or territory law
       
    • your employee can influence the rate or amount of super you contribute for them.

    The extra contributions are reportable super contributions for employees, unless you show that:

    • 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.

    Example: extra contributions – individual employment contract

    Adnan is an employee of Johnson Pty Ltd. While negotiating his individual common law employment contract. Johnson Pty Ltd agrees to pay Adnan super contributions of 12% of his salary.

    Johnson Pty Ltd has no policy about the employer contributions it pays for its employees. It allows employees to negotiate any rate of employer contribution they wish over the 9.5% required by super guarantee law. Adnan and the other employees have contributions made on their behalf at varying rates.

    Johnson Pty Ltd must record the extra contributions made for Adnan as reportable employer super contributions. Adnan's ordinary time earnings (OTE) are the same as his salary, so the amount recorded is 2.5% of Adnan's salary. That is, the amount that is additional to the minimum contributions Johnson Pty Ltd must make under super guarantee law.

    Summary

    • Additional contributions: employee individual salary package.
    • Johnson Pty Ltd must record extra contributions.
    • Johnson Pty Ltd must make 2.5% additional contributions.
    End of example

     

    Example: non-arm's length agreement

    Tula is an employee and director of MGK Pty Ltd. Tula's employment conditions are governed by an industrial agreement. The agreement was negotiated between Tula and the other employees of MGK Pty Ltd.

    The other employees are Tula's husband and their two adult children. There was no external involvement in the negotiation of the agreement. It was not made at arm's length. The agreement requires MGK Pty Ltd to make super contributions equal to 15% of the employees' salaries to super.

    The employer contributions made on behalf of Tula and her fellow employees are required under the terms of an agreement. The agreement was not negotiated at arms' length. Therefore, Tula and the other employees could influence the contributions. For all 4 employees, MGK Pty Ltd must report the difference between the minimum amount required to meet super guarantee obligations and the amount paid under the industrial agreement.

    Summary

    • Industrial agreement not negotiated at arm's length.
    • Employees can influence the super contributions.
    • MGK Pty Ltd must report the difference between the minimum amount required to meet SG obligations and the amount paid under the agreement.
    End of example

     

    Example: employee influence on outcome

    Under Jill's industrial agreement, she is required to contribute 5.75% of her OTE to an industry super fund. Jill can make the contribution from either her pre-tax or post-tax income. She decides 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 is reduced. This amount is a reportable employer super contribution.

    End of example

    Non-reportable contributions

    The following employer super contributions are not reportable:

    Example: industrial agreement without employee influence

    Amanda operates a business employing 20 workers. Under their industrial agreement, Amanda must contribute 10% of her employees' OTE to a super fund. That is, 0.5% more than the amount required under super guarantee law.

    Apart from voting on the agreement, Amanda's employees have no influence over the amount of super she contributes. This means that the super contributions Amanda makes for her workers are not reportable employer super contributions.

    End of example

    Extra contributions without employee influence

    You could pay more super than required because of:

    • an employer policy or similar arrangements
    • administrative or payroll simplicity.

    If your employee cannot influence these contributions, they are not reportable. It does not matter if the employee is employed under a collectively negotiated industrial agreement or individual employment contract.

    Example: extra contributions under employer policy

    Clarke Pty Ltd employs different types of workers on individual contracts and collective industrial agreements. Clarke Pty Ltd has always paid employer contributions at a minimum rate of 12% of their employee's salary. This is regardless of the type of agreement. Employees are not able to negotiate an employer contribution rate lower than 12%.

    The company policy is long-standing and is documented in Clarke Pty Ltd's record-keeping system. No employee is receiving less than 12% employer contribution support.

    The 12% employer super contributions are not reportable because the employees have no influence over the contribution rate.

    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.

    Summary

    • Clarke Pty Ltd pays employer super contributions at 12% of employees' salary
    • The 12% employer super contributions are not reportable
    • In accordance with company policy, employee contributions over the compulsory 12% are reportable
    End of example

     

    Example: extra contributions for administrative simplicity

    Vangie employs several full-time and casual employees in her business. Some of her casual employees rarely earn more than $450 in a calendar month. This means Vangie doesn't have to make super guarantee contributions for them.

    Vangie's payroll system automatically calculates super contributions for her employees at the rate of 9.5% of their ordinary time earnings (OTE). This is the case even if they earn less than $450 in a calendar month. This means that Vangie is making super contributions for some employees even though she isn't required. She does this because it's easier under her payroll system.

    Vangie's employees have no choice about how much super she contributes on their behalf, so the contributions are not reportable employer super contributions.

    Summary

    • Vangie employs casual workers who rarely earn more than $450 a month
    • Vangie's payroll system automatically calculates super contributions at 9.5% of their OTE
    • The contributions are not reportable employer super contributions and employees have no choice on how much super is contributed
    End of example

    Keeping records

    You must keep records to show whether your employee influenced the super contributions you made on their behalf.

    This includes records of:

    • how you calculated reportable employer super contributions
    • how you calculated the employee-influenced portion of the total employer contribution
    • how you calculated your employee's salary or ordinary time earnings (OTE)
    • relevant salary sacrifice agreements
    • relevant industrial agreements.

    You must keep your records:

    • for 5 years after they are prepared, obtained, or the transactions are completed – whichever occurs last
    • in English, or in a form we can access and understand, so that we can work out the tax you're liable to pay.

    Information for your employees

    Reportable employer super contributions are not included in your employee's assessable income. However, these contributions are included in the income tests for a range of government benefits and obligations.

    What your employees need to do

    Your employees must include the reportable employer super contribution amount on their income tax returns.

    The information will be pre-filled on their income tax return if they complete their return online and you have:

    • finalised your data through Single Touch Payroll
    • sent us your PAYG payment summary annual report.

    If not, your employee will need to copy the amount to their income tax return.

    We will calculate their entitlements or obligations by including the reportable employer super contribution in certain income tests.

    Effect on benefits and obligations

    Reportable employer super contributions are included in the income tests for:

    • some benefits and obligations administered by CentrelinkExternal Link and the Child Support AgencyExternal Link
    • the following benefits and obligations that 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
      • entrepreneurs' tax offset
      • super co-contributions
      • deduction for personal super contributions
      • low income super contributions
      • Division 293 tax on contributions
      • Higher Education Loan Program and Student Financial Supplement Scheme repayments
      • tax concessions for certain employee share schemes
      • deductions for non-commercial losses.
       
    Last modified: 26 May 2021QC 21716