The Australian superannuation landscape is changing. With the introduction of Single Touch Payroll the Australian Taxation Office (ATO) has access to more real time data than ever before. Recent and proposed changes to tax laws means it might be time to review your employer superannuation compliance. Changes recently passed and additional proposed legislative changes currently being considered by Parliament include:
- Superannuation guarantee (SG) now applies on salary packaged amounts;
- SG contribution caps for high income earners with multiple employers; and
- Penalty and interest remission for self-correctors under an amnesty.
Single touch payroll
Single touch payroll (STP) in now in force for the vast majority of employers.
Employers no longer need to provide the ATO with a payment summary annual report at the end of the financial year. In addition, employers will not need to provide their employees with a payment summary. Employees will be able to obtain the relevant information from the ATO via myGov as all relevant information will be prefilled in an employee’s income tax return.
STP also requires real time reporting of SG obligations, meaning that the ATO can quickly identify late and underpayments of SG because of data matching with SuperStream and superannuation fund reporting information.
Changes to superannuation obligations with salary packaging
Previously, when an employee entered into a salary sacrifice arrangement, this reduced the superannuation base on which employers were required to calculate minimum SG payments. However, from 1 January 2020 the changes in Treasury Laws Amendment (2019 Tax Integrity and Other Measures No. 1) Act 2019 will require employers to pay the minimum SG amount based on the employee’s full salary amount regardless of whether salary is reduced by a salary sacrifice arrangement.
The below table demonstrates the potential additional cost to employers.
| |
To 30 June 2020 |
From 1 July 2020 |
| Packaged salary |
$90,000 |
$90,000 |
| Salary sacrificed amount |
$12,500 |
$12,500 |
| Salary remaining before taxes |
$77,500 |
$77,500 |
| Superannuation base |
$77,500 |
$90,000 |
| SG rate |
9.5% |
9.5% |
| Minimum SG amount |
$7,362.50 |
$8,550.00 |
In the above scenario, under the new legislation the employee receives an additional $1,187.50 of superannuation contributions per annum.
Higher income earners
Changes enacted in Treasury Laws Amendment (2018 Superannuation Measures No. 1) Act 2019 have made it easier for high income earners to not breach their annual superannuation contribution caps.
Previously, high income earners working for multiple employers could trigger excess contributions tax obligations as employers are obliged to contribute 9.5% SG up to the maximum quarterly contribution base, regardless of whether the sum of all wages in a quarter would exceed the maximum contribution base.
From 1 July 2018, certain employees with more than one employer can apply to the ATO for an employer shortfall exemption certificate. This certificate reduces the amount of SG an employer has to pay to that particular employee for the quarter and instead provides the employee with the ability to negotiate with their employer to provide either other cash or non-cash remuneration alternatives.
Employers can make zero contributions for the quarter with comfort that no SG shortfall would arise as the ATO cannot vary or revoke this certificate once granted.
Superannuation guarantee amnesty
If the Treasury Laws Amendment (Recovering Unpaid Superannuation) Bill 2019 passes through the Senate in its current form, non-complying employers will be provided with an amnesty to self-correct unpaid SG during the period 1 July 1992 to 1 January 2018.
Should an employer come forward, no administrative penalties will be applied with scope to remit further penalties available at the Commissioner’s discretion. As an added benefit SG shortfall payments will be deductible for the employer. If the ATO audits the employer and discovers an SG shortfall, any payments are normally non-deductible.
More information will be available if and when the proposed changes become law.
Other superannuation matters to be aware of
Additionally, the ATO has announced it is enacting other matters regarding superannuation, including:
- Initiatives to connect employees with $20.8 billion of lost super; and
- Clarification of the rules to assist self-managed superannuation funds (SMSFs) in identifying non-arm’s length transactions. Currently, the failure to correctly classify can result in an SMSF being taxed at 45% instead of a concessional 15%.
How we can help
Moore Australia can assist in reviewing your employer superannuation obligations. For more information, please contact your Moore advisor.