Interesting info
Posted on another forum I frequent
http://forums.silverstackers.com/topic-9993-salary-sacrificing-warning.html:
Found out this morning that what I thought was a common understanding of salary sacrificing additional superannuation contributions was incorrect, and it appears to be pretty common misunderstanding!
If you salary sacrifice into super, it REDUCES the amount of super that your employer is required to pay - in fact you can salary sacrifice to the point where your employer does not have to make any contributions at all!
For example, if you're on a salary of $100,000 (to pick a round number), your employer makes an additional 9% superannuation contribution (known as the super guarantee payment). This is 9% of "ordinary time earnings", or OTE, and you get a $9,000 contribution.
Now, two important facts:
1. Super guarantee payment is calculated on the reduced salary
Salary sacrificing reduces your OTE, and therefore the amount of super that your employer has to contribute.
2. The salary sacrificed amount counts towards your super guarantee obligations
Your employer can count your OWN contributions towards the 9%!!!!
So with the example above, if you decide to salary sacrifice an additional 3%, or $3000, into your super, you don't necessarily end up with $3000 plus $9000 in your super.
So you salary sacrifice $3000, leaving your OTE at $97,000. 9% of $97,000 is only $8,730 - and you've kicked in $3,000 of this, so your employer only has to contribute a minimum of $5,730! You can actually receive less superannuation overall by salary sacrificing, in addition to reducing your salary!
This is the letter of the law - you can negotiate salary sacrificing on top of the normal contribution, but if your employer follows the letter of the law, they can count your salary sacrificed amount towards the super guarantee, and reduce the amount they pay by a corresponding amount, and the overall total is less than what you would have received in both salary AND super is less than if you had not sacrificed at all.
Now obviously many employers still pay the 9% as expected, i.e. $9,000 in this case, and the employee's contribution takes it to $12,000 overall - but the point is, this is NOT how the law can be interpreted.
I worked out that salary sacrificing 8.26% effectively cancels out your employer from making any contributions at all if they interpret the law strictly, and that you would have to set your sacrifice at the full 9% just to get the amount of super that you would have if you didn't sacrifice anything, and over 9% to get ANYTHING more into super than you would have without sacrificing. Obviously while you're sacrificing, your OTE and therefore your after-tax takehome is also being reduced.
Read
http://www.ato.gov.au/nonprofit/content … &page=6&H6 carefully, and pay attention to the example at the end.
For the purpose of this example, Sally and Zoe's quarterly salaries equal their ordinary time earnings.
Sally and Zoe are both eligible employees for super guarantee purposes, and their employer is required to contribute a minimum amount into their super funds - that is, 9% of their ordinary time earnings.
The super guarantee amount their employer is required to pay for Sally is calculated at 9% of her quarterly salary of $11,250, which is $1,012.50 per quarter or $4,050 per year.
Since Zoë has salary sacrificed $10,000 of her earnings into her super fund, the minimum super guarantee amount her employer is required to pay for Zoë is calculated at 9% of her reduced quarterly salary of $8,750, which is $787.50 per quarter or $3,150 per year.
However, as Zoë's salary sacrificed amount of $10,000 is an employer contribution and is more than the super guarantee amount the employer is required to pay, the salary sacrificed amount satisfies her employer's super guarantee obligation. This means Zoë's employer is not required by law to contribute an amount to her super fund in addition to the salary sacrificed amount of $10,000. Zoe and her employer may agree that her employer will continue to make additional employer contributions equivalent to the super guarantee that would have been payable if not for the salary sacrifice agreement.
If you're salary sacrificing, make sure you have a written agreement that your employer will still continue to make employer contributions equivalent to the super guarantee that would have been payable
.
