Important: Insurance legislative changes to super

18/06/2008

As you may know, there are two major insurance legislative changes that will affect the administration of your employee super fund from 1 July 2008.

1. Employer obligation for minimum level of 'death only' cover

Under the Federal Government’s Choice of Superannuation Fund legislation, from 1 July 2008 employer nominated funds (also known as default funds) are required to provide a minimum level of ‘death only’ insurance cover to members.

Do the BT default funds meet the requirement?

Yes, both BT Business Super and BT Lifetime Super Employer Plan currently meet the minimum level of 'death only' insurance cover as required by default funds under the legislation. Insurance is available to members at any time, subject to normal underwriting requirements.

Want to know more?

For more information, please refer to:

2. Ordinary Time Earnings the base for SG calculation

From 1 July 2008, the Superannuation Guarantee (SG) Administration Act 1992 will require all employers to use ordinary time earnings (OTE) as the earnings base on which SG is calculated for their employees. This change standardises the earnings base to OTE for all employees.

OTE is defined as the total of:

  1. earnings in respect of ordinary hours of work (other than certain lump sum payments made on the termination of employment, such as unused annual leave, long service leave and sick leave), and earnings consisting of over-award payments, shift loading or commission; or,
  2. if the total earnings under (a) is greater than the maximum contribution base - the maximum contributions base ($36,470 per quarter for 2007/08).

OTE does not include overtime payments, payments made in lieu of notice, redundancy payments, and payments when on maternity or paternity leave and bonuses that do not relate to specific performance criteria.

What about alternative earnings bases?

Some employers calculate SG contributions on an alternative earnings base under arrangements existing prior to 21 August 1991. Alternative earnings bases may be contained in:

  • an industrial award
  • an existing agreement between an employee and their employer
  • a superannuation fund’s trust deed, or
  • a Commonwealth, State or Territory Law

Employers who are currently calculating SG contributions for their employees using an alternative earnings base need to convert to the new regime from 1 July 2008 or be liable for the SG charge.

From 1 July 2008, employees with an alternative earnings base lower than OTE will see larger SG contributions made on their behalf as it will be based on their larger OTE amount. However, some employees who will have their SG contribution calculation converted from an alternative earnings base to OTE may see a reduction in their take home salary.

Want to know more?

Further information about OTE and superannuation guarantee is available on the ATO website at www.ato.gov.au/super (opens in a new window) and in Superannuation Guarantee Rulings SGR 94/1, SGR 94/4, SGR 94/4A, SGR 94/5 and SGG 94/5A.