Employers and Salary Sacrifice Agreements.
A MUST READ If you’re an employer with employees under a salary sacrifice agreement.
Super guarantee payment is calculated on your employees reduced salary
The amount of SG your must pay your employee is worked out on the employees ordinary time earnings. When the employee enters into a salary sacrifice arrangement with you, it reduces their ordinary time earnings, therefore will reduce the amount of SG you have to pay.
Salary sacrificed amount counts towards employer’s SG payment obligations
If your employee makes super contributions under a salary sacrifice agreement, the sacrificed amount is paid by you the employer into the employees’ super fund and is treated as an employer contribution. This means that the sacrificed amount counts towards your SG contribution obligations.
If the employees salary sacrificed super contributions are more than the SG amount you are required to pay (currently 9.50% of their ordinary time earnings), then you are not required under SG legislation to pay an additional amount on top of the salary sacrificed amounts.
Example
Matthew and Jo work for and ABC department store, earning $45000 a year. Jo entered into a salary sacrifice agreement with her employer to sacrifice $10000 of her income to her super fund. Matthew did not salary sacrifice any of his income.
The following table shows the difference between Matthew and Jo’s SG payments for the year ending 30 June 2015.
|
|
Matthew |
Jo |
|
Annual remuneration |
$45000 |
$45000 |
|
Super salary sacrifice |
– |
$10000 |
|
Ordinary time earnings |
$45000 |
$35000 |
|
9.50% employer contribution under the SG (2014-15 financial year rate) |
$4275 |
$3325 |
|
Salary sacrificed amount paid my employer |
– |
$10000 |
|
Amount the employer has to pay to meet SG obligations |
$4050 |
$0 |
Salary sacrificing into super reduces Jo’s ordinary time earnings from $45,000 to $35,000.
Under normal circumstances, Jo’s employer would be required to pay a 9.50% (2014-5 super guarantee rate) employer contribution on her ordinary time earnings. However, Jo should be aware that her employer does not need to make additional super contributions as the amount she is salary sacrificing is more than her employer’s super guarantee obligation.
The salary sacrifice arrangement between Jo and her employer should specify whether they will make any additional super contributions.
Agreement between you and your employee
It is advisable that you and your employee clearly state and agree on all the terms of any salary sacrifice arrangement. The contract is usually in writing, but may be a verbal one. If you enter into an undocumented salary sacrifice arrangement, you may have difficulty establishing the facts of your agreement. Subject to the terms of any contract of employment or industrial agreement, employees can renegotiate a salary sacrifice arrangement at any time. Where you have a renewable contract, you can renegotiate amounts of salary or wages to be sacrificed before the start of each renewal.
The contract of employment includes details of your remuneration, including any salary sacrifice arrangement. This contract can be varied by agreement between you and your employer.
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