The Institute of Public Accountants has criticised legislation that would leave a superannuation salary sacrifice loophole open until July 2020, and called for immediate action to stop this “legalised wage theft”.
Under current rules, when an employee salary sacrifices to make extra superannuation contributions their employer is allowed to offset these contributions against the Super Guarantee obligations on the employer – leaving the employee worse off.
“To make things worse, employers can calculate SG obligations on a (lower) post salary sacrifice earnings base. Employees who salary sacrifice to boost their superannuation savings may end up with lower superannuation contributions than they expect,” explained Institute of Public Accountants CEO Andrew Conway.
“We would hope that most employers do the right thing by their staff but while this loophole exists, wage theft can continue to take place, potentially without detection.”
Legislation to close this ‘loophole’ was recently reintroduced to Parliament. The Coalition announced in 2017 the intention to make the change, but it was included in a Bill along with changes to super choice – which stalled in the Senate. The new Bill is expected to pass much easier, as it doesn’t include the super choice changes.
The Institute of Public Accountants appears welcoming of the new Bill, but questions why the salary sacrifice change only starts from 1 July 2020.
“The explanatory memorandum to the Bill does not explain why the measure has a delayed start date presumably allowing those who use the loophole to adjust their business practices,” said Conway.
“This situation needs to be rectified as quickly as possible to cease the opportunity for potential wage theft. It’s ironic that whilst we are discussing an SG increase to 12 per cent, some employees will not be receiving the current 9.5 per cent while this loophole exists.”
“When someone undertakes a salary sacrifice into superannuation they are attempting to provide sufficient savings to live more comfortably when they retire. They are sacrificing spending money today to build their nest egg which is a good thing as it means less reliance on Government support in retirement.”
“No one would undertake such a strategy if they knowingly knew that their hard-earned dollars were being used to offset their employer’s SG obligations. It’s counter intuitive to think otherwise.”