With your agreement, an employee can 'sacrifice' part of their salary or wages into a variety of benefits, including super.
If an employee salary-sacrifices into super, you make super contributions to the fund on your employee's behalf. There may be benefits to both of you, but the arrangement must comply with the rules for salary sacrificing.
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- Super contributions to complying super funds are not a fringe benefit (and therefore not subject to fringe benefits tax).
- The employee's assessable income is reduced by the amount sacrificed – that is, the amount sacrificed is not subject to PAYG tax and is not declared as income by the employee.
- The contributions are taxed in the super fund at the concessional rate of 15%, which is usually less than the employee would pay if they took the money as salary.
But there are limits to how much super can be contributed in a year – any contribution over the relevant cap amount is subject to extra tax.
- Your super guarantee (SG) payments for the employee are based on their reduced salary.
- The salary-sacrificed amount may count towards your SG payment obligations.
- The salary-sacrificed amount counts as a deductible contribution for you (providing the arrangement meets the conditions for salary sacrifice).
Reporting salary-sacrificed amounts
If you make super contributions under a salary-sacrifice arrangement or make extra super contributions to a super fund for an employee, you may need to report those contributions on your employee's payment summary.
Subject to your agreement, an employee can 'sacrifice' part of their salary or wages into a variety of benefits, including super. If you make super contributions for an employee under a salary-sacrifice arrangement, there may be benefits for both you and your employee.