Superannuation Guarantee opt out for high income earners
After a number of false starts the measures announced in the 2018-19 Federal Budget to allow individuals with high incomes to opt out of receiving superannuation guarantee contributions from certain employers has been legislated.
For the quarter commencing 1 January 2020 those with income greater than $263,157 and multiple employers can use the opt out to avoid unintentionally going over the $25,000 concessional contribution cap.
How will it work?
An individual with an income that exceeds $263,157 and multiple employers will be able to nominate their remuneration from certain employers to be excluded from superannuation guarantee legislation. To be eligible individuals will still need to receive superannuation contributions from at least one employer.
Who will benefit?
The changes are expected to benefit high income individuals such as:
- directors or board members of multiple organisations;
- doctors with a private medical practice who also work in the public hospital system; and
- dentists or vets carrying out locum work at multiple practices where they are paid personally for the work they perform.
How to apply?
Individuals can access the relevant form on the Australian Taxation Office (ATO) website. Once the form is completed it’s then lodged with the ATO for approval. Keep in mind the completed form will need to be lodged with the ATO at least 60 days before the start of the quarter that will be covered by the exemption certificate. However, for the quarter commencing 1 January 2020 the ATO will accept applications up to 18 November 2019.
If approved, the ATO will issue a certificate to both the individual and the exempted employer. The Commissioner will not provide the certificate unless the ATO is satisfied that the individual would have excess concessional contributions if the certificate was not issued.
An exemption certificate can apply for a period of up to four quarters in one financial year. A separate application will be required for each financial year, and once issued, it cannot be revoked.
Things to be aware of
Employers should make sure they do not cease superannuation contributions without the necessary certificate from the ATO.
The certificate is not binding on the employer and so the exempted employer could still choose to make compulsory superannuation contributions if they are cautious of receiving an unexpected tax bill. (Remember, it is employers who bear the risk when SG contributions are underpaid – they become liable for the SG charge, including associated penalties and administration loadings.)
Employees should ensure that they negotiate an alternative remuneration package with their employer for the relevant quarter or year to have the forgone contributions paid as additional salary.
If you would like to discuss how the SG exemptions apply to your personal circumstances please our superannuation specialists on:
Brisbane – Clive Todd
Melbourne – Michael Jones
Sydney – Jeremy Mortlock
+61 7 3218 3900
+61 3 9252 0800
+61 2 9922 1166
Published: 30 October 2019
Please note that this publication is intended to provide a general summary and should not be relied upon as a substitute for personal advice.