A Senate inquiry has been told that a ‘loophole’ which allows salary sacrifice contributions to be counted against Superannuation Guarantee (SG) obligations should be closed.
The Senate has been conducting an inquiry into Super Guarantee non-payment. Several of the submissions to the inquiry have called for this, so-called, loophole to be closed, including a joint submission by Industry Super Australia and Cbus.
“Currently, if an employee makes voluntary contributions, a loophole allows their employer to count this towards SG obligations,” said the submission, calling for it to be closed “immediately” by the Government.
“Many employees make voluntary additional super contributions under a salary sacrifice arrangement in the belief that they are increasing their superannuation over and above the SG.”
“The majority of employers understand and support the efforts of their employees to build their retirement nest eggs by providing genuine salary sacrifice arrangements over and above their SG obligations. However, some do not.”
“Employees do not understand that if they salary sacrifice into super, their employer can use this to meet their SG obligation. The key motivation for an employee to make additional salary sacrifice contributions is to boost their retirement savings. This loophole should be closed immediately.”
Chartered Accountants of Accountants and New Zealand (CAANZ) also recommends that salary sacrifice contributions not count for SG.
“As compulsory employer super is foregone salary and wages we think employers should not be permitted to reduce their compulsory super contributions because an employee has elected to contribute via salary sacrifice unless this has been clearly established under employment conditions,” said the CAANZ submission.
The submission by the Institute of Public Accountants said the loophole was one of the main drivers of SG non-compliance.