Salary Sacrifice - Are you receiving your full benefits?

Salary sacrifice strategies are a great way to boost retirement savings. However, unwelcome loopholes in the law mean that some workers may be getting less than they bargained for. The government is taking action to fix this, in the meantime all salary-sacrificing workers should be across this issue, keeping an eye on their arrangement and ensure they’re not being short-changed.

Most employees understand that their employers must make compulsory super guarantee (SG) contributions of 9.5% of their salary and wages. Where it gets tricky is when an employee chooses to salary sacrifice. 

Under current laws, employees who sacrifice some of their salary in return for additional super contributions may end up receiving less than they expected because of the following two legal loopholes:

  • Employers may choose to count the salary sacrifice contributions they make towards satisfying their obligation to make minimum SG contributions of 9.5%.
  • Additionally, employers may calculate their 9.5% contributions liability based on the employee’s reduced salary after deducting sacrificed amounts, rather than the pre-sacrifice salary.

In practice, many employers aren’t taking advantage of these loopholes and are honouring the employees intended contributions strategy. However, evidence suggests some employers are applying the above rules differently, they may even do this inadvertently through their payroll processes.

A fix is on the way

Proposed new laws before Parliament will close the loopholes by requiring employers to pay compulsory SG contributions at 9.5% of the pre-sacrifice amount of salary. In addition, any salary sacrifice contributions will not count towards satisfying the employer’s obligation to make compulsory SG contributions.

What should you do? 

If passed, the proposed new laws will only apply to quarters beginning on or after 1 July 2020. All salary-sacrificing workers should check their arrangements now to ensure they’re receiving the full intended benefit of the arrangement.

As an employer it is suggested you review your payroll process and identify how SG is being paid, for now there are no impacts on what rule has been used, however, all employers should anticipate the passage of the proposed laws and ensure that their payroll will be compliant from 1 July 2020.

For assistance handling your superannuation please contact your Mazars advisor or alternatively:

Brisbane – Clive Todd

Melbourne – Michael Jones

Sydney – Jeremy Mortlock

+61 7 3218 3900

+61 3 9252 0800

+61 2 9922 1166


Published: 25/10/2019

Please note that this publication is intended to provide a general summary and should not be relied upon as a substitute for personal advice.

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