With the concessional superannuation contribution cap now set at $25,000, high income earners are more at risk of breaching the annual limit, particularly if they receive contributions from multiple employers.
Now, under an amendment to superannuation rules currently before the House of Representatives, employees will be able to apply to the Commissioner of Taxation to opt out of the super guarantee regime of any particular employer. This change is planned to start on July 1.
According to the super guarantee rules, employees must have a minimum level of superannuation contributions made by their employer. An SG charge is imposed on employers who fail to contribute a minimum percentage of their employees’ ordinary time earnings into super.
The SG rules apply to each employer and if an employee has multiple employers, each of them must make contributions on the employee’s behalf. As a result, employees may exceed their contribution cap.
Under the rules set out in the amendment, the ATO can issue an “employer shortfall exemption certificate”, which stops the employer getting into trouble for having a super guarantee shortfall.
The amendment allows the employee and employer to agree to recommence super contributions down the track. This may be relevant where an employee’s circumstances change and they no longer expect to exceed the contribution cap.
The information memorandum accompanying the amendment bill says the employee and employer are free to negotiate to receive additional cash or non-cash remuneration in place of the SG contribution.
If an employee breaks the contribution cap, excess concessional contributions are included in the individual’s assessable income and taxed at marginal rates less a 15 per cent tax offset (representing the tax paid when the money goes into the super fund). There is also a charge based on the shortfall interest charge to cover the resultant late payment of tax.