The simple answer is YES…

I had an interesting conversation with a client’s employer recently. She was telling me that if my client wishes to contribute $6,000 P/A to his Super via salary-sacrifice, which constitutes as a concessional contribution, it would satisfy the employer’s responsibility to pay SGC (Super Guarantee Charge).

Two points of interest arise from salary-sacrificing to super, it’s not as simple s most people think. Apart from a contributions cap of $25,000 per annum if you are aged under 50 & $50,000 per annum cap if you are aged 50 and over, any salary-sacrifice arrangement reduces your employers OTE (ordinary time earnings), therefore will reduce the amount of Super Guarantee that they are required to pay. Also, and this is what really amazed me, should the client, the employee wish to salary sacrifice, the sacrificed amount counts towards his employer’s super guarantee obligation.

Example:

Let’s, say my client earns $100,000 as his ordinary time-earnings (OTE) His employer has an obligation to contribute 9% to a complying super fund or $9,000PA.

My client and I decide it would be wise to contribute $10,000 P/A as part of a Transition-to-Retirement Strategy (TTR) to super as salary-sacrifice (before tax contribution). Firstly this would reduce his OTE to $90,000 so my clients employers would only have to pay 9% on $90,000 = $8,100 (naturally his tax would be reduced by 0.37 cents on $10,000 = $3,700 less 15% contributions tax). As the $10,000 is a concessional contribution and is recognised as an employer’s contribution, my client’s employer has satisfied his total responsibility to pay any SGC.

So to enter into an effective salary-sacrifice arrangement with your employer(s) both parties need to have a written agreement which states the terms and conditions of that agreement including all super contributions made (SGC, salary-sacrifice, holiday pay and sick leave).

If you have any questions relating to this article please phone (08) 8304 8088 or email us admin@moneyworkspl.com.au .