Changes to salary sacrifice superannuation for employers
On January 1, 2020 the ATO brought in some changes (yes there are more – see a previous blog on super changes brought in July 2019) to Superannuation for your employees. These changes affect anyone sacrificing part or all of their salary in an effort to boost their retirement savings.
No longer will you be able to just ‘top up’ to 9.5% if the employee had previously been salary sacrificing into superannuation. From January 1, 2020, you, as the employer, are required to pay 9.5% of your employees’ ordinary time earnings and any amount they salary sacrifice into superannuation.
So let’s say Jane earns a salary $75K ($1442 per week). Previously she’d been sacrificing $400 a week to superannuation. Your Super contribution guarantee liability would previously have been as follows;
$1442 – 400 = 1042
$1042 x 9.5% = $98.99
Whereas now the calculation would be as follows;
$1442 x 9.5% = $136.99
The amount of superannuation guarantee you’re required to pay on top of Jane’s salary as her employer is $7125 over the year, regardless of how much Jane decides to sacrifice to her super. Of course Jane will want to stay within the caps for her age bracket and you might want to suggest that she seek professional financial advice before she decides to sacrifice most or all her salary into superannuation.
But you can see on that one employee how quickly that difference might add up, leaving you with a sizeable shortfall you’d be; required to;
A: make up and pay into your employees’ superannuation at the end of the year
B: pay any fines applicable
And if that’s not bad enough,
C: not be able to get a tax deduction on those late payments
(Although….breaking news: A superannuation guarantee amnesty has passed through parliament as is awaiting Royal Assent – more news on this soon)
Don’t forget you’re also required to include any salary sacrifice arrangements on the employees’ annual payment summary as reportable employer super contributions.
What these changes specifically mean for you is that, if you haven’t already, you’ll have to revisit all your employee agreements and update your systems as necessary to ensure you’re paying your employees appropriately and steering clear of falling foul of both the ATO (see what that might look like) and Fair Work.
Higher income super changes
Another new change that came into force as of January 1, 2020, was the ability for high income earners with multiple employers to opt out of receiving the superannuation guarantee (SG) if being paid super is likely to inadvertently see you breaching your contributions cap.
If this applies to any of your employees, they will need to submit an opt-out form, not surprisingly called the SG opt out for high income earners with multiple employers (NAT 75067) which will release you from paying your SG contributions for them for up to four quarters in one financial year. BUT…they’ll still need to be receiving SG contributions from at least one employer for each of those quarters. It’s not a get out of contributing to super card, so you, as their employer, might want to check that they’re contributing to superannuation somewhere. If you’re really not sure this is the right thing to do for this employee, you can choose to disregard the exemption certificate and continue making SG contributions to their complying superannuation fund.
Staying on top of all the legislation for tax, super and business can be really hard work. But it doesn’t have to be. Working with a trusted professional accountant can help ease that burden for you and your team. If having someone who gets you and your business sounds like something that might be of benefit, we’d be delighted to chat further. You can call us on 02 6023 1700 or by submitting the form below.
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