Salary sacrifice

How to report salary sacrifice amounts

If your employee had an effective salary sacrifice arrangement, you previously reported post-sacrifice amounts to us. This changes as part of STP Phase 2.

You now need to report the salary sacrifice amounts and separately include the pre-sacrificed income amounts in your STP report. Reporting the salary sacrifice amounts separately helps:

• us to assist your employees complete their tax return correctly by identifying pre-tax deductions from the payments you have reported through STP
• us identify where salary sacrifice arrangements may affect your employees’ super guarantee entitlements
• other government agencies identify where income is sacrificed that may affect your employees’ obligations or entitlements to other income tested payments.

When reporting salary sacrificed amounts, you report the actual amount of salary and wages which was sacrificed as one of the following salary sacrifice types:

• super (salary sacrifice type S) – for super to a complying fund or retirement savings account (RSA)
• other employee benefits (salary sacrifice type O) – for benefits other than super.

In your STP report, salary sacrifice components appear as positive amounts regardless of the salary packaging method you use. It's important to understand how your product manages salary sacrifice because some products may require you to enter negative amounts into your payroll so that calculations can be completed correctly.

You must not report amounts sacrificed from exempt foreign employment income as salary sacrifice in your STP report.

There are different rules if you are making post-tax deductions.

 

Relationship between reporting RESC and salary sacrifice type S

Often the amounts you report as salary sacrifice super (salary sacrifice type S) are also considered reportable employer super contributions (RESC). There are other contributions you may make to super for an employee that are RESC but not salary sacrificed.

It's important to remember that salary sacrifice type S and RESC are different things and used for different purposes.

Salary sacrifice type S helps us identify the pre-tax deduction so that we can:

• help your employee complete their tax return correctly
• ensure you are meeting your super guarantee obligations.

RESC:

• can include some additional kinds of super contributions that are not made under an effective salary sacrifice arrangement
• is used in income tests for various obligations and entitlements administered by the ATO and Services Australia, including study and training support loan repayments and Family Tax Benefit.

If an amount is both salary sacrifice type S and RESC, you need to report it as both in STP. When reporting salary sacrifice type S amounts, you must include them in your STP report during the financial year. You can continue to choose whether you report RESC during or at the end of the financial year.

Relationship between reporting RFBA and salary sacrifice type O

Reportable fringe benefits amounts (RFBA) may be related to the amounts you report as salary sacrifice other benefits (salary sacrifice type O) but can differ because some:

• benefits an employee receives from salary sacrificing may not also be RFBA
• benefits an employee receives may be RFBA but were not obtained from salary sacrificing
• actions, such as employee contributions, may change the value of RFBA relative to the salary sacrifice.

It's important to remember that salary sacrifice type O and RFBA are different things and used for different purposes:

• Salary sacrifice type O helps us identify the pre-tax deduction so that we can help your employee complete their tax return correctly.
• RFBA  
  • is used in income tests for various obligations and benefits administered by the ATO and Services Australia, including study and training support loan repayments and Family Tax Benefit
  • helps us ensure you are meeting your FBT obligations.

If an amount is both salary sacrifice type O and a RFBA, you need to report both:

• the amount of salary or wages which was sacrificed as salary sacrifice type O, and
• the grossed up taxable value of the benefits as RFBA.

When reporting salary sacrifice type O amounts, you must include them in your STP report during the financial year. You can continue to choose whether you report RFBA during or at the end of the financial year.

When you are reporting Salary sacrifice type O don't apply the same FBT rules you would for reporting RFBA.

• Don't gross up amounts you are reporting as Salary sacrifice type O.
• Make sure you report the actual amount your employee has sacrificed from salary and wages, even if sacrificed for a benefit that may be exempt or otherwise not taxable for FBT purposes.

Salary sacrifice super (salary sacrifice type S)

You should include salary sacrifice to a complying super fund or RSA from an effective salary sacrifice arrangement.

The following table outlines what should and shouldn't be included in salary sacrifice super (salary sacrifice type S).

Salary sacrifice super reporting examples

Include	Don't include
amounts sacrificed to a complying super fund or RSA due to an effective salary sacrifice agreement	compulsory SG – this should be reported as super liability additional extra super paid at the employer's discretion – this should be reported as super liability and may also be included in reportable employer super contributions (RESC) non-effective salary sacrifice arrangements – this should be reported as gross

Salary sacrifice other employee benefits (salary sacrifice type O)

You must include salary sacrifice of all benefits from an effective salary arrangement. This includes where the sacrifice relates to benefits that are exempt from FBT, such as living-away-from-home allowance and laptops used primarily for business purposes.

The following table outlines what should and shouldn't be included in Other employee benefits salary sacrifice (Salary sacrifice type O).

Salary sacrifice other employee benefits reporting examples

Include	Don't include
benefits from an effective salary sacrifice agreement including   novated leases airline lounge memberships portable electronic devices	non-effective salary sacrifice arrangements – this should be reported as gross employee benefits given to an employee that have not been sacrificed such as entertainment fringe benefits

Salary sacrifice through a third-party provider

Some employers outsource the management of their salary sacrifice arrangements to a third-party provider rather than managing those arrangements themselves. In this situation you must still include salary sacrifice amounts in your STP reporting.

We understand that this might mean your provider has not given you all the information you need in time for your STP reporting. You know that your employee has sacrificed an amount, but you might not know whether it is salary sacrifice to super, salary sacrifice to other employee benefits, or a combination of both.

We have a concessional approach to help you report in this situation:

• You can report the whole amount sacrificed as salary sacrifice type O (Other benefits).
• Make a correction to your reporting when you know how much salary was sacrificed towards super.
• Ensure that when you finalise at the end of the financial year your STP reporting is showing the correct amounts.

This is a concession for STP reporting only – it does not change your super guarantee obligations. You still need to make sure that you are paying at least the minimum super guarantee on your employee’s OTE base (including amounts salary sacrificed to super) each quarter.

Refunds of salary sacrifice

Some circumstances may result in a refund of salary sacrifice amounts to an employee. The way to report this correctly depends on whether the refund of salary sacrifice occurs in the same, or in a different, financial year from when the amount was initially sacrificed.

The steps you need to take in your product to make these changes correctly will differ between payroll solutions. It is important to make sure you understand your DSPs instructions.

The following table shows the actions you need to take when reporting a refund of salary sacrifice if it occurs within the same financial year as the initial sacrifice.

Reporting a refund of salary sacrifice in the same year

Action	Reason
Reduce the YTD amounts you have reported as: Salary sacrifice type S by the amount of the refund relating to sacrifice to super, and Salary sacrifice type O by the amount of the refund relating to sacrifice to other benefits.	We use the pre-sacrifice income amounts you report together with the salary sacrifice amounts to determine the post-sacrifice income that needs to be included in an employee's tax return. Refunding a salary sacrifice amount means that your employee has actually sacrificed less of their salary than what you have reported. Reducing the salary sacrifice amount ensures the post-sacrifice income can still be correctly determined.
Withhold from the salary sacrifice refund and include the additional PAYG withholding in your STP report	If the amount had originally been paid to the employee as salary or wages, you would have withheld from it and reported the withholding in your STP report. However, you didn't because the amount was sacrificed. As you are now paying this amount to the employee, you still need to withhold and report the withholding in your STP report.
Check whether you have paid super on the refunded amount in a previous quarter. If you haven't, pay the additional super and include the amount in your STP reporting.	As an employer, you need to make sure that you have met your super obligations relating to the salary sacrifice refund amount. Depending on the circumstances you may already have paid super on it (such as where the sacrifice was to super), or you may need to pay additional super. It is important to confirm this (and if you need to, pay the additional super) so that your employee receives the super they are entitled to.
Check the RESC and RFBA you have reported to ensure you have not overstated them due to the refund of salary sacrifice.	If you have already reported RESC or RFBA relating to the same amount which is now being refunded, you need to make sure you correct that reporting so the amount is not double counted as income and as RESC or RFBA. RESC and RFBA are included in your employee’s income for calculating some things like study and training support loan repayments and certain benefits, so double counting the salary sacrifice refund amounts can disadvantage your employee.

The following table shows the actions you need to take when reporting a refund of salary sacrifice if it occurs in a different financial year as the initial sacrifice for both:

• the current financial year when the refund of salary sacrifice occurs
• the previous financial year when the amount was sacrificed.

This is so your employees’ income can be treated correctly in their tax returns and when calculating their other entitlements or obligations, such as study and training support loan repayments, for both affected financial years.

Reporting a refund of salary sacrifice in a different year

Action	Reason
For the current financial year, increase the YTD amounts you have reported as Gross by the total amount of the refund.	As the refund of salary sacrifice is occurring in the current financial year: you have an obligation as an employer to report through STP that you have paid it your employee has an obligation to include it in their tax return. Taking this step ensures the refunded salary sacrifice amount is included in your reporting and your employee's tax return for the correct financial year.
Withhold from the salary sacrifice refund and include the additional PAYG withholding in your STP report for the current financial year.	If the amount had originally been paid to the employee as salary or wages, you would have withheld from it and reported the PAYG withholding in your STP report. However, you did not because the amount was sacrificed instead. As you are now paying this amount to the employee, you still need to withhold and report the PAYG withholding in your STP report.
Check whether you have paid super on the refunded amount in a previous quarter and, if you haven’t, pay the additional super and include the additional super amount in your STP reporting for the current financial year.	As an employer, you need to make sure that you have met your super obligations relating to the salary sacrifice refund amount. Depending on the circumstances you may already have paid super on it (such as where the sacrifice was to super), or you may need to pay additional super. It is important to confirm this (and if you need to, pay the additional super) so that your employee receives the super they are entitled to.
For the previous financial year, reduce the YTD amount you have reported as: Gross by the total amount of the refund Salary sacrifice type S by the amount of the refund relating to sacrifice to super, and Salary sacrifice type O by the amount of the refund relating to sacrifice to other benefits.	As both you and your employee have obligations to include the refunded salary sacrifice amount in the STP reporting and tax return for the current financial year, you need to correct your reporting for the previous financial year so that it isn't double-counted in both years. Reducing both Gross and the reported salary sacrifice amounts ensures that when we use the pre-sacrifice income amounts you reported together with the salary sacrifice amounts to work out the post-sacrifice income that needs to be included in your employee's tax return, we can still determine the correct amount.
For the previous financial year, check the RESC and RFBA you have reported to ensure you have not overstated them due to the refund of salary sacrifice.	If you have reported RESC or RFBA relating to the same amount which is now being refunded, you need to make sure you correct that reporting so the same amount is not double counted as RESC or RFBA in one financial year and as income in another. RESC and RFBA are included in your employee’s income for calculating some things like study and training support loan repayments and certain benefits, so double counting the salary sacrifice refund amounts can disadvantage your employee.

If the refund of salary sacrifice is being paid by a different entity within your economic group (whether within the same financial year or not) you should follow the steps above for refunds occurring outside of the financial year. Treat the references in those steps to ‘current financial year’ and ‘previous financial year’ as ‘current entity’ and ‘previous entity’, but if the salary sacrifice refund has crossed between financial years you also need to make sure your corrections relate to the correct financial year.