What does 'capacity to influence' mean?
If you arrange for your employer to contribute more super than they're required to, you are considered to have the 'capacity to influence' the amount of contributions made.
Your capacity to influence is shown by:
- your relationship with the employer
- your involvement in negotiations concerning the terms of any industrial agreement governing the super contributions
- the amount the employer contributes for you relative to the compulsory contributions the employer is required to make
- the super contribution arrangements the employer has in place for other employees
- any non-arm’s length dealings.
Generally, you're not considered to have the capacity to influence the amount of super contributions your employer makes on your behalf where employees:
- vote for a collective agreement
- are part of a group that negotiates a collective agreement with the employer.
You're considered to have influenced the amount of contributions your employer makes on your behalf where you can directly negotiate, or have an option to directly negotiate, an employer super contribution in excess of compulsory contributions.
Example 2: Employee influence
During the 2014–15 income year, Tula is an employee of MGK Pty Ltd. Tula’s employment conditions are governed by an industrial agreement negotiated between Tula and the other employees of MGK Pty Ltd.
The other employees are Tula’s husband, Tony, and their adult children, Michael and Rena. There was no external involvement in the negotiations 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 their employees' salary to super.
As the employer contributions are required under the terms of an agreement that was not negotiated at arm's length, Tula had capacity to influence the contributions.
MGK Pty Ltd must report the difference between the minimum amount required to meet their obligations under the super guarantee law and the amount paid under the industrial agreement.
This is because the contributions made on behalf of Tula and her fellow employees are both:
- required under the terms of an agreement that was not negotiated at arm’s length
- contributions Tula had capacity to influence.
Under the super guarantee law, the charge percentage for 2014–15 is 9.5% of the ordinary time earnings of an employee.
If Tula’s ordinary time earnings are $60,000, the amount of reportable employer super contributions is 5.5% of $60,000, or $3,300 (the 5.5% applied is the difference between 9.5% and the contributed 15%).
End of example
Example 3: Employee influence
Under Jill's industrial agreement, she is required to contribute 6% of her ordinary time earnings to an industry super fund.
Jill can make the contribution from 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 it is contributed so her assessable income is reduced. This will be a reportable employer super contribution.
End of example
Example 4: Employee did not influence
During the 2014–15 income year, 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 expire soon and Trevor was nominated as a bargaining representative. Trevor consulted with employees, who wanted an increase in super contributions to match their colleagues in other companies. They wanted an additional 1.5%, increasing the employer super contributions from the minimum 9.5% to 11%.
Trevor was successful in obtaining an increase in employer super contributions to 11%. All negotiations were at arm's length. While Trevor was involved and benefits from the increased employer super contribution, the additional 1.5% is not reportable employer super contributions for Trevor because he didn't directly influence the contribution amount.
The contribution amount was collectively negotiated between the employer and the employees. The additional 1.5% super contribution is not reportable employer super contributions for employees of TKY Pty Ltd as it's part of the compulsory 11% employer super contribution in their industrial agreement.
End of example