New employer superannuation reporting rules

New reporting obligations that came into effect on 1 July 2009 mean that many employers now need to make changes to their payroll systems and update payment summaries to include reportable employer super contributions.

Reportable employer superannuation contributions are those made for an employee where the following two conditions apply:

The employee influenced the amount of superannuation contributed for them; and
The contributions are additional to the compulsory contributions made under superannuation guarantee law.

An employee will generally have the capacity to influence the amount of superannuation contributions where they can directly negotiate, or have the option to directly negotiate an employer superannuation contribution in excess of the compulsory contributions that must be paid. This typically occurs under a salary sacrifice arrangement where the employee requests that extra superannuation contributions be made in return for a reduction in salary.

Other common situations where influence is exerted by the employee include where the employee requests that a bonus be paid as a superannuation contribution instead of salary, or where employees negotiate a higher rate of superannuation under a collective agreement with the employer.

There are certain situations where contributions in excess of the super guarantee rate of 9% will not need to be reported because of an ongoing and documented employer policy. For example, an employer may have a policy of contributing superannuation at the rate of 12% of salary for all its employees and those employees are not able to negotiate a lower contribution rate than 12%.

Employers that use a computerised payroll system will most likely need to setup new super categories in their payroll to ensure that the correct information is recorded on employee payment summaries.

The new rules also require employers to keep records to prove whether or not employees influenced the extra super contributions made on their behalf including:

Information on how reportable super contributions were calculated;
Information on how the employee influenced portion of the total employer contribution was calculated;
Information on how the employee’s salary was calculated;
Copies of relevant salary sacrifice agreements; and
Copies of relevant employment contracts and industrial agreements.

It is important to note that reportable employer contributions are not included in the employee’s gross income. Instead they are shown on employee’s payment summaries in the same manner as reportable fringe benefits. Therefore an employee will only be required to disclose the relevant amount on their tax return.

However, the reportable contributions will be included in the income tests for a range of government benefits and obligations including:

Medicare levy surcharge threshold calculation
All Dependant tax offsets
Senior Australians tax offset
Pensioner tax offset
Mature age worker tax offset
Super co-contributions
Deduction for personal super contributions

These new reporting rules may therefore ultimately impact on the amount of tax payable by the employee on their final tax assessment.

It is a little baffling why the Government has introduced these reporting rules and imposed further administrative obligations on employers, whilst at the same time they have halved the amounts that can be contributed by employers into superannuation from 1 July 2009.

Furthermore, as the maximum concessional contribution limits of $25,000 for the under 50’s and $50,000 for those aged 50 and over include super guarantee contributions, there is now reduced scope for employees to salary sacrifice large amounts into superannuation.

This article has been provided by practising Chartered Accountant Joe Kaleb of the small business information website www.australianbiz.com.au. The site provides practical tax and business articles, finance and tax calculators, templates, and other tools to assist business owners to better manage their business and income tax obligations. The site also provides other services including professional indemnity and business insurance quotes, commercial, property, factoring and leasing finance and a comprehensive directory of Australian accounting firms to assist businesses to find an accountant.

Disclaimer:
The material should not be relied upon. Super Matters, any Australian Member, any related entity of those persons, or any of their officers employees or representatives, will not be liable for any loss or damage arising out of or in connection with the material contained in this publication.

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New employer superannuation reporting rules