Average workers hardest hit by salary sacrifice ‘loophole’

Almost two thirds of workers hit by a superannuation salary sacrifice ‘loophole’ earn less than $80,000 a year, according to analysis of ATO data by Industry Super Australia.

Industry Super Australia (ISA) is calling for the “loophole” which allows salary sacrifice superannuation contributions to be counted against Super Guarantee obligations – reducing the amount of super an employer needs to pay at the cost of the employee – to be closed.

61% of those affected by this so-called loophole earn under $80,001 a year, according to the analysis by ISA. Across all income ranges the issue affects 358,450 employees, with an “average amount underpaid” of $3,891.

“Salary sacrificing additional super contributions is an important way to boost final retirement savings – but it will only help if it is on top of the compulsory 9.5% paid by employers,” said David Whiteley, Chief Executive of Industry Super Australia.

“While there is a legal loophole there for employers to reduce their contributions it is not what common sense and fairness would dictate.”

“Reliance by some employers on this loophole significantly undercuts efforts by their employees to increase their retirement savings.”

“Until the loophole is closed employees should check the arrangements applying to them and seek agreement with employers to maintain their 9.5% minimum employer contributions on their full pay, on top of any salary sacrificed amount.”

“Closing the loophole must be a priority for Government along with requiring super contributions are paid at least monthly rather than quarterly.”

According to research conducted by Industry Super Australia and Cbus 2.4 million Australians are not being paid their full super entitlements, with the underpayment calculated at $3.6 billion in 2013/14 – excluding the issue with salary sacrifice.

Want to be kept up-to-date with SMSF and Superannuation changes, why not subscribe to our Newsletter?

This article, as with all content on this site, is for informational purposes only, and is not legal, financial, tax or other advice. Please read our Terms and Conditions of Use.

One Reply to “Average workers hardest hit by salary sacrifice ‘loophole’”

  1. “Industry Super Australia (ISA) is calling for the “loophole” which allows salary sacrifice superannuation contributions to be counted against Super Guarantee obligations – reducing the amount of super an employer needs to pay at the cost of the employee – to be closed.”

    Whoa, not so fast! Before this so called ‘loophole’ is closed what first needs to be done is NOT allow employers to have the ability to refuse the employee to Salary Safrifice.

    Employer,’So you want to SS and have me pay you the full 9.5% in Super? I don’t think so, but here is a counter deal, I will allow you to reduce your Tax Liability ie. you will be paid more cash and you can put that money into SS savings if I can reduce my 9.5% Super payment to you?” What choice does the employee have under this threat if the employee want’s to SS????

    If only the ‘loophole’ was closed then the employer could still refuse to allow the employee to SS …. then noone is a winner!!

Leave a Reply

Your email address will not be published. Required fields are marked *