Since 1 January 2020, certain high-income earning employees have had the ability to opt out of receiving certain Superannuation Guarantee (SG) contributions.
Who is eligible to opt out
Employees with more than one employer who expect the total of their employers’ mandated superannuation contributions to exceed the concessional contributions cap for a financial year are eligible to opt out.
Many doctors will fit into this category where they:
- work at more than one hospital; or
- draw wages from their private practice while also working in the public hospital system
Why opt out
The measures are designed for salary and wage earners with multiple employers who have effectively been forced to exceed their concessional contributions cap due to their combined compulsory SG contributions.
Opting out means avoiding unintentional contribution excesses and will generally reduce the administrative burden of affected employees, giving them greater certainty and structure in building their super balances.
For example, say an employee earns $180,000 from employer A and $120,000 from employer B. Ordinarily, the employers are legally obliged to contribute as follows:
A $18,900, being 10.5% of $180,000
B $12,600, being 10.5% of $120,000
Total $31,500
As the concessional contributions cap is $27,500, the employee is served with an excess concessional contributions determination for an amount of $4,000 which will attract additional tax up to their marginal tax rate. Had they instead been able to arrange additional wages in lieu of these super contributions, they could have avoided the uncertainty and extra administration that comes with exceeding the contribution caps.
How the measures work
- The employee applies to the ATO for a “SG employer shortfall exemption certificate” via the ATO website.
- The certificate is issued provided the ATO is satisfied that:
- the employee would exceed the concessional contributions cap if not for the certificate;
- at least one of the employee’s employers is still required to make mandated SG contributions on their behalf; and
- it is appropriate to issue the certificate in the circumstances.
Once issued, the certificate is provided to the relevant employee and employers. It releases one or more current employers from their SG obligations for up to four quarters in one financial year.
When to apply
Eligible employees will need to lodge applications at least 60 days before the first day of the first quarter that the application relates to.
| Quarter beginning | Received by ATO on or before |
| 1 July | 2 May |
| 1 October | 2 August |
| 1 January | 2 November of the preceding calendar year |
| 1 April | 31 January (or 1 February in a leap year) |
A separate application is required for each financial year.
Considerations prior to applying
Eligible employees should consider their employment arrangements, particularly the effect some awards or workplace agreements may have on their remuneration packages.
For example, employees unable to reach an agreement with their employer to provide additional wages in lieu of compulsory super contributions may find no benefit in applying for the certificate.
Learn more
To learn more about how this may apply to you, contact Kristy Baxter or Angela Stavropoulos on taxmed@pilotpartners.com.au or (07) 3023 1300.