The ATO has brought in an exemption to help prevent the breaching of Superannuation concessional contribution caps by individuals who have multiple employers and are likely to receive over $25,000 in superannuation guarantee contributions in a financial year.
All employers are required to pay 9.5% of an employee’s salary or wage directly to a superannuation fund (known as Superannuation Guarantee or SG) as concessional (pre tax) contributions. However, if the total of SG contributions is greater than $25,000 in a financial year, the employee will have the excess over $25k added on to their taxable income and be taxed at their marginal rate.
The employer is obligated to make these payments even if it causes the employee to exceed the concessional contribution cap.
Individuals with more than one employer, who expect their employers’ SG contributions will exceed their concessional contributions cap for a financial year, are now able to apply for an exemption certificate to release some of their employers from their SG obligations. The Individual will still need to receive SG payments from at least one employer.
Applications are to be submitted by the individual to the ATO for each quarter at least 60 days before the start of the quarter for which the exemption is sought.
The exemption certificate does not prevent the employer from making super contributions on behalf of the employee or change the employer’s obligations under a workplace award or agreement. It merely prevents the employer being penalised for not contributing the superannuation guarantee. Employees will need to discuss their remuneration with their employers before making an application as any changes to pay and entitlements need to be negotiated.
This exemption may not be the best option for everyone who’s eligible. Things to consider are employment arrangements, such as how pay and other entitlements may change and the effect of any relevant award or workplace agreement applicable to the individual.
To find out more please contact your Davidsons team member or call us on 03 5221 6399.
Disclaimer: The information that is provided in this article is factual in nature and objectively ascertainable and, therefore, does not constitute financial product advice. Importantly, the factual information that has been supplied does not take into account your personal circumstances, objectives or goals. Davidsons is not licensed to provide any financial product advice nor make any recommendations in respect of any financial product. If you require such advice, you will need to consult a financial adviser who is licensed to provide financial product advice before you make a decision on a financial product.