Don’t Get Caught Out By Changes To The Superannuation Guarantee
A new bill has been introduced to Parliament, aimed to reduce superannuation theft. If passed it will prevent employers from paying less than the mandated 9.5% super, which current legislation allows for. FastTrack sat down with Max Ciereszko, Compliance and Requirements Leader at FastTrack, to find out more about the superannuation guarantee loophole, and what it potentially means for your business, including employers and employees. Here’s what you need to know.
FastTrack: What is the superannuation guarantee loophole?
Max Ciereszko: Employers are legally obligated to pay 9.5% super on employee’s earnings, or it might be a higher amount dictated by an award. The loophole currently is that if an employee salary sacrifices their gross income into super, the employer can reduce the amount of superannuation they have to contribute on behalf of the employee.
What this effectively allows an employer to do is say ‘well, you’re already salary sacrificing 2% of your gross income into superannuation so we can contribute 7.5% towards your super, not 9.5%.’ Not all employers do this but some do and, currently, it’s completely legal.
FT: Why is the government concerned about this?
MC: The Government is concerned about it is because it discourages people from contributing more to their super, and so they end up with less savings at retirement. The current legislation may encourage the mindset of, ‘oh, I want to contribute more into my super, but then my employer will then reduce the amount of super they have to pay on my behalf, so what’s the point?’ It’s counter-productive. So the idea behind this new bill is to protect employees.
FT: How could it potentially affect FastTrack customers?
MC: Currently in FastTrack360, there is the ability to set up salary sacrifice deductions to reduce superable earnings. This means when the system calculates employer superannuation contributions, it will calculate the employer contribution based on earnings after the salary sacrifice has been deducted. As a result, if the employer contribution is calculated based on a percentage of earnings, the result is a lower employer contribution amount.
If salary sacrifice deductions are configured to reduce superable earnings, FastTrack users will have to revise that configuration to switch off the option to reduce superable earnings to take effect from 1 July 2020, which is the date when this change will take effect if the legislation passes.
FT: How likely do you think it is that it will pass?
MC: It’s looking likely. It was specifically removed out of a separate bill that stalled in Parliament and was added into the Treasury Laws Amendment (2019 Tax Integrity & Other Measures No1) Bill 20, which is likely to be passed. It does have support from all sides of politics, so there’s a fair bit of momentum, as well as a fair bit of media coverage, so it’s very likely that it will pass, and that there’ll be little opposition to this coming into effect.
FT: As a FastTrack customer, where can I find more information about the changes?
MC: We’ll obviously keep clients informed when we find out any more information about the bill. We’ll use email communication, as well as update the compliance page. Clients can also keep track by using this government website where you can track bills and legislation, including the path of the bill through the senate. There’ll most likely be a lot of media coverage on it as well, as it is a pressing issue.