There may be benefits to both of you in that:
for your employee;
- salary sacrificing is a tax effective way of increasing their super, provided they stay within their contribution caps.
for you:
- salary sacrificed super contributions aren't subject to fringe benefits tax; and
- the contributions are tax deductible.
To get these benefits, the contributions must be:
- made under an 'effective salary sacrifice arrangement'; and
- to a complying super fund.
It is advisable that you and your employee clearly state and agree on all the terms of any salary sacrifice arrangement. You should consult the Fair Work Commission before proceeding.
Salary sacrifice contributions you make for an employee must be included on their annual payment summary as reportable employer super contributions.
You don't have to offer or agree to salary sacrifice arrangements with your employees.
CHANGES FROM 1 JANUARY 2020
From 1 January 2020, salary sacrificed super contributions can't be used to reduce your super guarantee obligations, regardless of the amount your employee elects to salary sacrifice.
This means the salary sacrificed amount does not count towards your super guarantee (SG) obligations.
A further change is that the super guarantee will be 9.5% of the employee's ordinary time earnings (OTE) 'base'. The base is the sum of:
- the employee's OTE; and
- the amount salary sacrificed from the employee's OTE.
You need to:
- review your salary sacrifice arrangements to make sure you are:
- using your employee's OTE base to calculate your SG obligation;
- not counting salary sacrificed amounts towards the minimum amount of SG you have to pay; and
- check that all your systems correctly calculate your SG obligations.
EXAMPLE: EMPLOYER ADJUSTS ARRANGEMENT TO ENSURE AMOUNTS SALARY SACRIFICED ARE NOW INCLUDED IN THE EMPLOYEE'S OTE BASE.
Shelly earns $2,000 a week and has an effective salary sacrifice agreement with her employer to sacrifice $250 to her superannuation fund each week. Shelly's salary only comprises OTE amounts.
Shelly’s employer previously calculated his SG liability on Shelly's after salary sacrifice wage as follows:
$2,000 − $250 = $1,750
$1,750 × 9.5% = $166.25 SG liability
From 1 January 2020, Shelly’s employer must calculate the SG liability on her OTE base which includes the salary sacrificed OTE amounts. The calculation is:
$2,000 × 9.5% = $190.00
This is in addition to the $250 Shelly salary sacrifices each week. Shelly’s employer makes the following payments to her super fund:
salary sacrificed amounts of $250 each week (as per agreement) and SG contributions of $2,470 each quarter ($190 × 13 weeks).