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  • Contributions made under industrial agreements

    The super contributions you make for an employee are not reportable employer super contributions if both of the following apply:

    • you make the contributions to meet the terms of an industrial agreement
    • the employee did not, or could not, directly influence the terms of the agreement.

    Example: Industrial agreement without employee influence

    Amanda operates a business employing 20 workers. Under their industrial agreement, Amanda must contribute 10% of her employees' ordinary time earnings 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 the super contributions Amanda makes for her workers are not reportable employer super contributions.

    End of example

    Employee influence and industrial agreements

    If an employee enters into an arrangement with you to contribute more super than you're required to, that employee is considered to have 'capacity to influence' the amount of contributions made. The employee's capacity to influence is shown by:

    • your relationship with the employee
    • the involvement of your employee in negotiations concerning the terms of any industrial agreement governing the super contributions
    • the size of the contributions for your employee relative to the compulsory contributions you're required to make
    • the super contribution arrangements you have in place for other employees
    • any non-arm's length dealings.

    An employee will not be taken to have the capacity to influence contributions merely because they vote for a collective agreement, or are part of a group that negotiates a collective agreement with you.

    An employee will be taken to have the capacity to influence contributions where they can directly negotiate, or have an option to directly negotiate, an employer super contribution in excess of the compulsory contributions.

    Example: Arm's length collective agreement

    Trevor is an employee of TKY Pty Ltd. Trevor's employment conditions are governed by an industrial agreement that is collectively negotiated between employees and TKY.

    The existing agreement will soon expire and Trevor has been nominated as a bargaining representative on behalf of TKY employees. Trevor consults with his fellow employees and, among other improvements, they want an increase in employer super contributions from the minimum 9.5% to 11.5%.

    Trevor negotiates the new agreement with TKY, which agrees to the increase in employer super contributions. All negotiations are at arm's length and, although Trevor is involved and will benefit from the increased contributions, the additional 2% is not reportable for him because he didn't directly influence the contribution amount – it was collectively negotiated between the employer and the employees.

    The additional 2% is not reportable for any employees of TKY because it's part of the compulsory 11.5% employer super contribution under the terms of the industrial agreement.

    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 that 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 and it was not made at arm's length. The agreement requires MGK Pty Ltd to contribute an amount equal to 15% of the employees' salaries 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 and the other employees had capacity to influence the contributions. MGK Pty Ltd must report, for all four employees, the difference between the minimum amount required to meet super guarantee obligations and the amount paid under the industrial agreement.

    End of example


    Example: Employee influence on outcome

    Under Jill's industrial agreement, she's required to contribute 5.75% of her ordinary time earnings 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

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      Last modified: 29 Oct 2019QC 21716