Previously employers were allowed to claim the salary sacrifice superannuation contributions of their employees against their own Super Guarantee obligations – leaving the employee worse off.
Last year legislation – the Treasury Laws Amendment (2019 Tax Integrity and Other Measures No. 1) Act 2019 – passed the Parliament to close this ‘loophole’, from 1 January 2020. The Institute of Public Accountants (IPA) has warned employers to “beware”, now that the rules have changed.
While often described as a loophole, the ATO acknowledged it was how the legislation operated in a 2006 ruling.
“The loophole came about where an employee salary sacrificed into his or her superannuation and the employer used that contribution to form part of the employer’s obligation to pay the 9.5 per cent SG,” said IPA chief executive officer Andrew Conway.
The IPA had advocated for the start date to be brought forward from the originally drafted 1 July 2020 to 1 July 2019, but the legislation was amended to include the 1 January 2020 start date. The Government announced the intention to make this change in mid-2017, but the legislation languished in the Senate. The new 2019 Bill passed after amendments from the Government, Labor and Centre Alliance.
“Those employers who were doing the wrong thing by their employees can no longer get away with it,” said Conway.
“As of 1 January 2020, employers cannot use employee salary sacrificed contributions to fulfill employer SG commitments.”
“We would encourage employees to consider salary sacrificing into their superannuation if they are financially able to do so, to build their retirement nest egg.”
“We also recommend that employees check to ensure they are receiving the minimum SG contribution, from their employers, which is currently 9.5 per cent.”