Salary Sacrifice and Superannuation – New Protection for Employees

Subject to the passage of legislation, commencing 1 July 2018 employees who salary sacrifice superannuation are protected from having their Superannuation Guarantee (SG) entitlement reduced.

Before this date, salary sacrifice contributions – although made from an employee’s salary – could reduce an employer’s SG liability. Salary sacrificed amounts, if paid late, could also be offset against the SG amount due. Despite this, some employers still generously contributed the full 9.5% contribution calculated on the pre-sacrifice (gross) salary. However many did not.

To protect employees, from 1 July 2018, amounts that an employee salary sacrifices to superannuation cannot reduce an employer’s SG liability. Salary sacrificed amounts also do not form part of any late contributions an employer makes that are eligible to be offset against the SG liability. To avoid a shortfall for a quarter, an employer must contribute at least 9.5% of an employee’s Ordinary Time Earnings (OTE) base to a complying superannuation fund or retirement savings account (RSA). Under the new rules, an employee’s OTE base is comprised of their OTE and any amounts sacrificed into superannuation that would have been OTE, but for the salary sacrifice arrangement.


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