Salary Sacrifice and Compulsory Super

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Salary Sacrifice and Compulsory Super

Compulsory Super is the 9.5% (from July 2014) that an employer must pay you on top of your taxable wages.

Salary Sacrifice can cover among other things, a contribution to your own Super.

Add the TWO together and you may create a problem, but this depends on the Employer.

Note this statement from the ATO

 If you make the super contributions to an employee’s fund under a salary sacrifice agreement, the sacrificed amount is an employer contribution. This means that the salary sacrificed amount counts towards your super guarantee obligation.

Two examples are shown here to try to explain this:

Example One:

$100,000 Normal Salary
$9,500 Employer pays into your Super fund

Example Two:

$100,000 Normal Salary
You choose to Salary Sacrifice [SS] $10,000 into your super.

You EXPECT this result:

$90,000 Adjusted Salary ($100,000 less $10,000 [SS]
$19,500 Employer pays into your Super fund ($9,500 + $10,000 [SS])

BUT, it be this legally:

$90,000 Adjusted Salary ($100,000 less $10,000 [SS]
$10,000 Employer pays into your Super fund. This exceeds the 9.5% compulsory figure ($8,550 = 9.5% of the adjusted salary of $90,000) so the employer does not need to pay any extra

Make sure any Salary Sacrifice agreement is worded legally to ensure the correct result.

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