Previously, it has been common practice for employees to sacrifice part of their salary or wages to boost their super contributions. In these types of salary sacrificing arrangements, employers have paid the sacrificed amount to the employee’s super fund on their behalf.
Salary sacrificing has many benefits in that it provides a:
- Tax effective way of increasing an employee’s super; and
- No fringe benefits tax with contributions being tax deductible.
However, employees are set to receive more benefits come 1 January, 2020 with the new changes in the law to super obligations.
Under new laws, an employer still must adhere to their super guarantee obligations regardless of whether an employee opts to sacrifice their salary or not. In short, this means the salary an employee has sacrificed does not count towards an employer’s super guarantee obligations leading to an added benefit to employees. Failure to abide by the new superannuation laws can result in a fine of up to $10,500 or 12 months imprisonment.
To ensure your salary sacrificing arrangements are calculated correctly in accordance with new laws and you have the correct agreement in place, please don’t hesitate to contact a member of our friendly team to discuss your obligations.
Rebekah O’Sullivan, Senior Associate, Entertainment, Intellectual Property and Immigration Lawyer