Legislative Changes to Salary Sacrifice and Super in AU

From 1 January 2020, salary sacrificed super contributions cannot be used to reduce your super guarantee obligations, regardless of the amount your employee elects to salary sacrifice. This means for the purposes of super guarantee (SG), the salary sacrificed amount will not count towards your super guarantee obligations.

In addition, the amount of super you are required to pay, to avoid the super guarantee charge will be 9.5% of the employee's ordinary time earnings (OTE) base. The employee's OTE base is the sum of the employee's OTE and any sacrificed OTE amounts.

Here are links to the ATO for more information regarding this.

https://www.ato.gov.au/Business/Super-for-employers/In-detail/Salary-sacrifice/Salary-sacrificing-super---information-for-employers/

https://www.ato.gov.au/General/New-legislation/In-detail/Super/Superannuation-Guarantee---Salary-sacrifice-integrity/

What do we need to do?

Chances are you may not need to do anything, in our experience very few customers reduce their SGC when the employee does a Salary Sacrifice. But you should check and action the following for 1/1/2020:

Employee Record : Salary Packaging for Super

In the Payroll>Single Touch Payroll (AU) menu run the search "Salary Packaging for Super Review"
If you find any results, ie. employees in the search then you should edit the employee record and tick the "Salary Packaging for Super" checkbox on the Payroll Tab>Calculation info of the employee.

Pay Component Record : Reduce Employer Contribution

In the Payroll>Single Touch Payroll (AU) menu run the search "Reduce Employer Contribution Review"
If you find any results, ie. Pay components in the search then you should edit the Pay component record and untick the "Reduce Employer Contribution" checkbox.

Here is what TAPS https://www.payroll.com.au/ have to say on the matter :

Salary sacrifice contributions cannot be used to reduce an employer’s minimum superannuation guarantee contributions.

In our previous eTAPS, we mentioned that we were tracking a Bill that will close the loopholes used by employers to ‘short change’ employees who choose to make salary sacrifice contributions into their superannuation accounts. The proposal of this change is contained in:

Treasury Laws Amendment (2019 Tax Integrity and Other Measures No. 1) Bill 2019

This proposal has now progressed and passed both houses. It awaits Royal Assent.

Before the proposed change, it was common for employers to calculate superannuation contributions in one of three ways:

1. On the base salary - before any salary sacrifice is deducted

Base OTE per quarter	$100,000
Salary Sacrifice	$10,000
Taxable Salary	$90,000
Superannuation ($100,000 x 9.5%) =	$9,500

2. On the taxable salary - after salary sacrifice is deducted

Base OTE per quarter	$100,000
Salary Sacrifice	$10,000
Taxable Salary	$90,000
Superannuation ($90,000 x 9.5%) =	$8,550

3. Salary sacrifice amounts to superannuation are deemed employer contributions. This means the salary sacrifice amount could be taken as meeting the employer obligation if the amount covered the minimum 9.5% SG contribution per quarter. This means no additional employer contributions would need to be made.

Base OTE per quarter	$100,000
Salary Sacrifice	$10,000
Taxable Salary	$90,000
No additional employer superannuation contributions are included, because the employer has utilised the employee’s salary sacrifice contributions to meet their SG obligations.

Option two and three will not be acceptable anymore.

In summary, the employer contributions will need to be calculated on the pre-salary sacrifice base and employers cannot calculate superannuation contributions on the post salary sacrifice OTE base. Additionally, employers cannot use salary sacrificed amounts to satisfy their superannuation obligations.

When does this apply?

The amendments made by this new law will apply to working out an employer’s superannuation guarantee shortfall for quarters beginning on or after 1 January 2020.

For more information of the new law please visit the below link:

https://www.aph.gov.au/Parliamentary_Business/Bills_Legislation/Bills_Search_Results/Result?bId=r6369