The ATO recommends that employers review their salary sacrifice arrangements due to new laws that will come into effect from 1 January 2020.

In the new year, employers can no longer use salary sacrificed contributions to reduce their superannuation guarantee obligations, regardless of the amount employees elect to voluntarily contribute to their super funds. The compulsory amount of super that employers are required to pay to avoid the super guarantee charge will be 9.5% of an employee’s ordinary time earnings and any sacrificed ordinary time earnings amounts.

Employers who currently fail to comply with these new requirements will have to update their systems and arrangements. For example, employers who contribute the 9.5 per cent superannuation guarantee only on the cash salary of their employees, will need to amend their agreements. Similarly, employers will incur additional costs from 1 January 2020 where all super contributions are quoted on top of, rather than within a remuneration package.

ESV Partner, Tim Valtwies commented on the legislative changes, “There has been much media attention on wage theft by employers over the last 18 months. Employers should examine their current policy and treatment of their employee’s salary sacrificed superannuation. If you use an outsourced provider, you should seek assurance from them that they have amended and updated their systems to ensure you meet your obligations.”

Should you have any questions regarding this new application of salary sacrificing and the superannuation guarantee or require any business advice, please contact you ESV engagement partner on 02 9283 1666.