If you already have a process set up for salary sacrifice, it’s worth making sure it’s set up properly for your employees, or if you’re looking to set one up for your employees, then read on.
This means that the super fund your employee nominates needs to be set up properly under relevant regulatory bodies.
If you’re unsure, you can check at the Australian Taxation Office (ATO)’s Super Fund Lookup. If the fund your employee has chosen isn’t compliant, then you may have to pay Fringe Benefits Tax (FBT) on any contributions you make.
If your employee wishes to set up a salary sacrifice arrangement, it is worth formalising the arrangement in writing, stipulating what the arrangement is, including the relevant dates, and any terms and conditions. For example, is the arrangement perpetual, a once-off, or is there an end-date after certain payments.
Whilst having the agreement in writing is one thing, ensuring your employee understands the set-up is important. This means that once the nominated salary amount has been ‘sacrificed’, they will not be able to access it until they reach their preservation age, or meet a condition of release (which you can read about in our Accessing your super article).
Payments won’t be considered salary sacrifice if set up for someone else, e.g. a spouse of an employee, rather, these payments would be considered a fringe benefit.
Just like your own personal superannuation, your employees have caps on how much they can contribute each year.
Ultimately it is the responsibility of your employee to know their limits on making super contributions, including, salary sacrifice amounts, mandated Super Guarantee contributions and any personal contributions made where they may claim a tax deduction.
Super funds don’t cut off contributions when people have reached certain limits. For concessional (that is, before-tax) contributions, the annual cap for 2020/21 is $25,000.
This is a stipulation from the ATO, so make sure your written agreement is kept on hand.
When you put together your employees' annual payment summaries, you'll need to list the respective salary sacrifice arrangements as Reportable Employer Super Contributions (RESC).
Employers can generally claim all employer super contributions, including salary sacrifice contributions for current employees, as a deduction for tax purposes.
This information is current as at 7 May 2021.
The information is prepared by BT Funds Management Limited ABN 63 002 916 458 (BTFM) the trustee of:
(a) BT Super for Life, BT Super for Life Westpac Group Plan and BT Super part of the superannuation fund Retirement Wrap ABN 39 827 542 991; and
(b) Asgard Employee Super Account part of the superannuation fund the Asgard Independence Plan Division Two ABN 90 194 410 365.
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