Remunerator News

Jan 21 2020

Employers Now Banned from Using Salary Sacrifice Payments to Meet SG Obligations

As of January 1, this year, employers are required to provide superannuation guarantee (SG) support on the amount of employee salary sacrificed contributions under salary sacrifice arrangements (SSA). That is, if you make super contributions for your employee under an effective salary sacrifice arrangement you must now calculate your super guarantee obligation based on your employee’s ordinary time earnings base; and you cannot count salary sacrifice contributions towards the minimum amount of super guarantee you have to pay.

Before this, employers were able to use employee salary sacrificed amounts to reduce their minimum superannuation guarantee.

Super guarantee based on ordinary time earnings base

The minimum amount of super guarantee you’re required to pay for your employee is based on their ordinary time base (OTE) base. This is the sum of your employee’s OTE and any sacrificed OTE amounts.

From January 1, your salary sacrifice arrangement will not reduce your employee’s OTE base and will not reduce the amount of super guarantee employers are required to pay.

Example provided by the ATO:

Sally and Zoe start work with the same organisation for remuneration of $60,000 a year. Zoe decides to enter into an effective salary sacrifice arrangement with her employer and will sacrifice $10,000 of her annual earnings into her super fund. Sally receives her earnings of $60,000 as salary.

Sally and Zoe are both eligible employees for super guarantee purposes. Their employer is required to contribute a minimum amount into their super funds – that is, 9.5% of their ordinary time earnings. Sally and Zoe’s salaries equal their ordinary time earnings.

From 1 January 2020, Zoe would be paid the same amount of super guarantee as Sally as the employer can no longer use the salary sacrifice agreement to satisfy or reduce their obligation.

Calculation of total salary and super

For more information see the ATO website here.