Superannuation Guarantee Determination

SGD 98/2

Superannuation guarantee: are superannuation contributions, which result from a salary sacrifice arrangement, made by the employer or are they made by the employee?

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FOI status:

may be releasedFOI number: I 1017882

1. A salary sacrifice arrangement is one where an employee forgoes part of the salary he or she would otherwise receive, in return for other benefits (e.g., superannuation benefits).

Example A

2. Ann's remuneration is $31,000. Under a salary sacrifice arrangement, Ann agrees to accept $30,000 in wages and $1,000 in superannuation contributions.

3. The superannuation contribution is made by the employer if the reduced salary is the amount the employee includes as assessable income for income tax purposes.

Note

4. The level of payment of employee entitlements and benefits that make reference to 'salary', such as long service leave, sick leave, holiday pay and superannuation contributions, is governed by the agreement between the employer and the employee or the rules of the superannuation fund. The 'salary' level upon which employee entitlements are based does not determine whether the superannuation contributions are made by the employer or the employee.

Example B

5. Assume the facts in Example A. If Ann's assessable income is the reduced salary component of $30,000, the $1,000 superannuation contribution is made by Ann's employer and not Ann. Ann's employer gets a $31,000 tax deduction, consisting of $30,000 wages and $1,000 superannuation contributions.

6. The superannuation contribution is made by the employee if the arrangement is no more than a redirection of the employee's salary. In some cases, employers simply withhold an amount from an employee's salary to pay into a superannuation fund on behalf of the employee. The amount withheld continues to be included in the employee's assessable income. Therefore, the contribution is made by the employee, not the employer, and does not count towards the employer's obligations under the Superannuation Guarantee legislation.

Example C

7. Ann's employer withholds an amount of $1,000 from Ann's salary and pays it into a superannuation fund on Ann's behalf. Ann is still required to pay tax on an assessable income of $31,000. The contribution is made by Ann and not her employer.

Commissioner of Taxation
25 November 1998

Previously released as SGD 93/4

References

ATO references:
NO NAT 92/7711-1; NAT 98/12605-8

Subject References:
assessable income
employee superannuation contributions
employer superannuation contributions
salary and wages income
salary sacrifice
salary sacrifice arrangement
superannuation contributions