Employers are obligated to pay 10% super on an employee's Ordinary Time Earnings (OTE). From 1 January 2020, salary sacrifice super amounts can no longer:
- count towards the amount of SG contributions an employer is required to make to avoid the super guarantee charge; and
- reduce an employee's ordinary time earnings that an employer is required to calculate SG contributions on.
Basically, this means that any amount being salary sacrifice towards an employee's super cannot be used to reduce an employee's OTE and thereby reduce the super payable by the employer. You can read more about this here.
Information on how to set up deduction categories can be accessed here. When setting up a salary sacrifice super deduction specifically, you must ensure the "Impact on SG Calculation" setting is set to "No impact". If any other setting is assigned, you are breaching superannuation laws.
If you have been incorrectly offsetting salary sacrifice amounts and have therefore not paid the employee the 10% contribution on the offset amounts, you will need to rectify this immediately and "backpay" the SG amount owing. To do this, complete the following steps:
- Generate a Deductions Report over the period or pay run this error occurred . You can filter the report by specific deduction category and/or employee.
- Determine the salary sacrifice deduction amount that was used to offset the employee's OTE. Do this by adding the total salary sacrifice amounts.
- Calculate 10% of the total salary sacrifice amount - this is the amount the employee has been underpaid in their SG contributions.
- Create an adhoc, empty pay run and add the affected employees in the pay run.
- For each affected employee, click on Actions > Adjust Super within their pay. Enter the 10% amount in the $ field and add a note clarifying this amount is an adjustment for the salary sacrifice offset (or something to that affect that helps explain to the employee what the adjustment is for). Finalise the pay run. You don't need to download the payment file as there are no funds being transmitted to the bank. You should publish the pay slips though so the employees have proof the adjustment has been made.
- Ensure the adjusted contribution amounts are submitted to the super funds/clearing house as part of your normal super processing cycle.
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