Superannuation Legislation for High Income Earners

The Government has passed superannuation legislation for high income earners (with income exceeding $263,157 per annum) which allows employees with more than one job to choose not to have the 9.5% superannuation guarantee paid by all their employers.

There is an annual cap of $25,000 per person on the amount of superannuation contributions that are tax-deductible (concessional contributions).

Once this cap is exceeded, additional tax applies.  Prior to this legislation being passed, high income earners with more than one employer all paying the 9.50% superannuation guarantee were effectively forced by legislation to exceed the $25,000 cap and pay the extra tax.

The new legislation allows anyone with income exceeding $263,157 to apply to the ATO for an Employer Shortfall Exemption Certificate. The certificate means the nominated employer does not have to pay the 9.5% superannuation guarantee for you.  You must still have at least one employer making superannuation guarantee contributions on your behalf.

As part of this process, it is expected that the total salary package for the employee will be unchanged. The employee will instead receive money as cash wages instead of superannuation contributions. This is for employers and employees to negotiate.

Example
Brian works for a medical practice and receives an income of $400,000 per annum. He also works at the local public hospital and receives an income of $200,000 per annum. If both employers pay the 9.5% superannuation guarantee, Brian will have more than $25,000 contributed into his superannuation fund and will pay additional tax accordingly.
 
Under the new rules, Brian requests a certificate so that the medical practice no longer pays him superannuation guarantee.  Brian now only has superannuation contributions of 9.5% on $200,000 of income ($19,000). In this scenario, Brian will have $6,000 left in his $25,000 concessional contribution cap for the year and will have additional income from the medical practice who pay the 9.50% superannuation guarantee to Brian as personal income rather than superannuation contributions. 

There are important factors to consider when utilising this superannuation legislation strategy.
We recommend that you seek professional advice to see how this strategy may impact your individual circumstances.

Please contact your local RSM office if you would like to discuss your individual circumstances and how this legislation may work best for you.

Financial Advice is provided by RSM Financial Services Australia 238 282.