New law regarding minimum Superannuation Guarantee contributions now in force
Employers need to be aware that as of 1 January 2020, an individual employee’s salary sacrifice contributions cannot be used to reduce an employer’s mandated minimum Superannuation Guarantee (SG) contributions. In addition, the SG contribution is paid on the pre-salary sacrifice base.
The new law, which was passed last year, also explicitly states that an employee’s Ordinary Time Earnings (OTE) base is made up of their OTE and any amounts that have been sacrificed into superannuation that would have been OTE, if not for the salary sacrifice.
Prior to 1 January 2020, salary-sacrificed amounts could be used to count towards employer SG contributions, thereby reducing an employer’s SG contribution obligation.
Previously this change was proposed for 1 July 2020 start, however it has been brought forward to come into effect on 1 January 2020.
Any employers who have previously used the employee salary sacrificed superannuation amount to form part of the employer’s 9.5 per cent SG obligation calculations will now attract Superannuation Guarantee charges on any shortfalls if they continue.
With the introduction of Single Touch Payroll (STP), the ATO now have greater access to real-time data including superannuation payments, and they are using this to safeguard the integrity of employer/employee relationships.