In a pre-budget submission, CAANZ said it is necessary for the government to review a number of measures to help simplify processes and ensure the integrity of the SG laws.
“Under current legislation, employers who offer employees salary sacrifice arrangements to increase their superannuation contributions are able to use the salary sacrificed amounts to satisfy their 9.5 per cent superannuation guarantee obligations,” the submission stated.
The submission said this can discourage employees from making additional contributions to increase their retirement savings, because by doing so they be forgoing their entitlement to prima facie 9.5 per cent employer superannuation payments.
“While many employers will pay the 9.5 per cent superannuation guarantee regardless, some will take advantage of the legislation for their own gain and the detriment of their employees,” said the submission.
Another “anomaly” that exits, the submission said, is the legislation that deals with employees participating in salary sacrifice arrangements.
“Currently, employers are only obliged to make superannuation guarantee contributions based on their employees’ reduced wage amount. That is, the superannuation guarantee amount is calculated on salary and wages after salary sacrifice,” the submission explained.
“If an employee does salary sacrifice amounts into superannuation, the amount of superannuation guarantee contributions they are entitled to diminishes also.”
CAANZ said both of these issues are in opposition with the government’s policy of requiring 9.5 per cent of earnings to be contributed to superannuation.
“In effect, current legislation can reduce the amount an individual saves over their working life, and instead benefits the employer,” said the submission.
CAANZ said it is recommending that the government amend the Superannuation Guarantee (Administration) Act 1992 so that employers are not able to utilise salary sacrificed superannuation contributions to satisfy their own SG obligations.
The submission has also called the government to change the legislation so that employers are required to calculate their SG obligations on a gross basis, before salary sacrifice arrangements are considered.
The submission noted, however, that the abolition of the 10 per cent rule may negate the need for either of the above changes as employees will no longer need to salary sacrifice in order to make additional superannuation contributions.
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SIS Section 64 requires employers to remit post tax contributions within 28 days after the end of the month in which the deduction is made.
However, SIS is silent on prompt remittance of salary sacrifice contributions.
In the absence of any provision in the employee’s industrial relations instrument (eg EBA, Award), another unresolved issue is a lack og legislative requirement to remit salary sacrifice contributions in a timely manner.
This is another law that should be corrected, regardless of whether the 10% rule is abolished or not. There are benefits to salary sacrificing in terms of paying reduced tax each pay and budget planning for those that prefer this method and they should not be penalised by their employers for doing so. However, if the employees have considered it properly and received appropriate advice, they would have an agreement with their employer based on their full entitlements being gross salary plus SG.