An employee can ‘sacrifice’ part of their salary or wages into super contributions under an agreement with you, the employer. You then pay the sacrificed amount to your employee’s super fund on their behalf. 

Benefits for the employee:

  • salary sacrificing is a tax effective way of increasing their super, provided they stay within their contribution caps.

Benefits for the employer:

  • salary sacrificed super contributions aren’t subject to fringe benefits tax; and

  • the contributions are tax deductible.

To quality for these benefits, the contributions must be made under an ‘effective salary sacrifice arrangement’ to a complying super fund.  

From 1 January 2020, salary sacrificed super contributions cannot be used to reduce your (the employer’s) super guarantee obligations, regardless of the amount your employee elects to salary sacrifice. This means for the purposes of super guarantee (SG), the salary sacrificed amount will not count towards your super guarantee obligations. 

In addition, the amount of super you are required to pay, to avoid the super guarantee charge will be 9.5% of the employee’s ordinary time earnings (OTE) base. The employee’s OTE base is the sum of the employee’s OTE and any sacrificed OTE amounts. 

This means employers must be careful in constructing their employment arrangements to ensure employee remuneration comprises, for example, a salary package comprising OTE and sacrificed OTE of $100,000. In addition, the employer will make 9.5% SG contributions thereon. 

Click here to view the ATO website on SG and salary sacrifice.

To find out more, please contact your accountant at Rosenfeld Kant on (02) 9375 1200 or email gary@roskant.com.au, raul@roskant.com.au or elias@roskant.com.au