With new super legislation changes enacted from 1 January 2020, it’s now even more important than ever to make sure you understand how these changes impact you.
Super guarantee opt-out
If you’re an employee, your employer is generally legally obliged to pay 9.5% of your gross wages (ordinary earnings) into super for you under the Super Guarantee (SG) legislation.
From 1 January 2020, eligible taxpayers who have multiple employers can choose to opt-out of receiving Super Guarantee (SG) contributions from some of their employers. The main reason you may want to elect not to be paid SG contributions from an employer is if by receiving the SG contribution, it puts you over your concessional contributions cap (currently $25,000 per year). This new legislation is aimed at high income earners who want to avoid paying ‘excess contributions tax’ on any concessional contributions made during the year that exceed $25,000.
To be eligible to opt-out you need to:
- Have more than one employer and
- Expect your employers SG contributions to exceed your concessional contributions cap for
If you satisfy the eligibility criteria, you will need to complete the required paperwork. Once submitted to the ATO, they will supply you with an exemption certificate for your employer. Your employer is obligated to comply with this certificate, however they can choose to keep paying your SG contributions. Therefore, it’s a good idea to speak with your employer first.
We would suggest speaking with our team to see if the above should be something you need to consider.
Salary sacrifice arrangements
If, as an employee, you have an effective salary sacrifice agreement with your employer, there are now new rules for your employer to calculate your 9.5% Super Guarantee (SG) contributions. From 1 January 2020, your employer must base the calculations of the 9.5% SG contributions on your ‘ordinary times earnings’. This means the salary sacrificed arrangement will not reduce your ‘ordinary times earnings’ base.
If your salary sacrifice agreement includes your salary sacrificing super contributions, your employer can also no longer use the salary sacrificed contributions as counting towards the 9.5% SG concessional contributions.
For an example, let’s say Zoe starts work with her new employer and receives a salary of $60,000. Zoe then decides to enter an effective salary sacrifice agreement and will sacrifice $10,000 of her earnings into super each year. Prior to 1 January 2020, Zoe’s employer was only required to pay the 9.5% SG contribution for Zoe at 9.5% of $50,000 (wages less salary sacrifice amount). However, from 1 January 2020 Zoe’s employer will now be required to pay 9.5% SG contributions on $60,000. This means Zoe is no longer adversely affected by salary sacrificing into super.