Changes 1 January to Minimum Super

Discussion in 'Accounting & Tax' started by [email protected], 10th Feb, 2020.

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  1. Paul@PAS

    [email protected] Tax, Accounting + SMSF + All things Property Tax Business Plus Member

    18th Jun, 2015
    Treasury Laws Amendment (2019 Tax Integrity and Other Measures No. 1) Bill 2019 was given Royal Assent. This bill contains revisions to super laws that will remove the ability for (dodgy) employers to count employee salary sacrifice towards their minimum 9.5% super obligations.

    Finally. Affected employees SHOULD obtain an increase in total super contributions that accrue on and after 1 January. The first payments affected may be those due by 28 April 2020. This means ALL employees should receive 9.5% of the total earnings incl of the salary sacrifice amounts AND the salary sacrifice amount.

    A employer who has reduced their 9.5% minimum by the amount chosen by the employee will face a immediate increase by that amount. Affected employees need to check and correct if this occurs. It is salary and wages theft. Up to 31 December 2019 it wasnt "theft" but dodgy.

    So why has it taken the Govt 26 years to implement this change ?
    Thats the fun bit and it contains a key trap and benefit.

    The Govt has legislated that minimum super contributions will progressively rise to 12% over time. Many employers had indicated they may not pass on the super change or pass on the increased super at the expense of salary rises in cases where a employee is already maximising their cap ($25K) which may harm them v's other workers who have chosen not to contribute. So the Government has acted to force their hand. And close an old loophole that is dodgy

    But it does contain a trap. Employees who ALREADY max their cap at 30 June 2021 may have a problem. This new rule may create excess contributions.

    Q On 1 July 2021 when super obligations rise to 10% how will that work ?
    A Unless the employees (not the employer they arent allowed to) REDUCE their salary sacrifice then the employer would be obliged to contribute and create an excess contribution concern. This will worsen with time. The excess contribution problem isnt major and basically will restore the employee to a similar position as if the excess didnt occur but it can also impact in other ways and may trigger the 3 year bring forward rule.

    Q : So everyone has a $25K cap and I need to check that closer to the time ?
    A : No. Its more complex than this. A employee will have a MINIMUM cap of $25K. But it could also be higher if they contributed less than $25K in each of the two prior years. Any shortfall in those years will increase their $25K cap. The higher cap is limited to those with total super balances under $500K in the PRIOR year.
    Q : So at the time I check and I find my concessional cap is $33K. So I can increase contributions further ?
    A : Yes that may be possible. Check your MyGov account or seek the information from your tax agent as they can access real ato data closer to the time.
    JohnPropChat and ChrisP73 like this.