If you’re an employee and you’re interested in growing your super, then you may be asking your employer to salary sacrifice super on your behalf. Did you know that the rules have changed recently?
You may be aware employees no longer need to salary sacrifice super via their payroll department. Since 1 July 2017, employees are able to make contributions into super from their after tax money and receive a tax deduction for the amount of the contribution (up to certain contribution caps). This means you can receive your take home pay and then contribute into super from your own money. On the face of it, this provides the same tax outcome as salary sacrificing through your employer.
However, did you know that your employer is only obligated to pay your 9.5% superannuation guarantee on your gross wage after subtracting the salary sacrificed super.
For example, if you receive $80,000 gross wages per year…your employer will pay 9.5% of $80,000 ($7,600) as super contributions on your behalf. If you were to salary sacrifice say $10,000 into super through your employer….your employer is only obligated to pay 9.5% of the post salary sacrificed wage of $70,000 ($6,650). Thereby you’re effectively losing $950 of super contributions from your employer.
In addition to the above, your employer could also use any salary sacrificed super amounts to satisfy their obligations to pay your 9.5% superannuation guarantee. Sound fair? Hence paying your own additional super from after tax money could be the better option.
As you can see from the above, the current system can be open to manipulation by cheeky employers. To alleviate this issue, new legislation has been passed and becomes effective from 1 January 2020.
The new legislation ensures employers cannot use any salary sacrificed super amounts to pay the mandated 9.5% super guarantee. It also stipulates the 9.5% superannuation guarantee must be paid on the pre-salary sacrificed gross wage. Using the above example, from 1 January 2020, an employer is required to pay 9.5% on the $80,000….not 9.5% of the $70,000. So, win win for employees.
If you have any concerns about your super, please call our office.