People with multiple employers can now apply to opt out of receiving superannuation guarantee contributions from one or more of those employers.
The new law, which took effect on 1 January, is designed to help people avoid unintentionally breaching their concessional contribution cap when they receive superannuation contributions from multiple employers.
An employee may apply to the Australian Taxation Office to opt out of the superannuation guarantee in respect of an employer and negotiate with the employer to receive additional cash or non-cash remuneration.
The ATO can grant an “employer shortfall exemption certificate”, which avoids a finding that the employer has a super guarantee payment shortfall.
The ATO may only issue a certificate if it is satisfied that the employee would otherwise be likely to have excess concessional contributions for the financial year.
Applications must be made by the employee. An employer cannot apply for an exemption certificate.
An exemption certificate can be made for a period of up to four quarters in one financial year. A separate application is required for each financial year. Applications must be lodged 60 days before the start of the next quarter.
Some of the occupational groups that will benefit from the new rules include company directors with a number of boards, doctors with a private practice who also work in a hospital and anyone doing locum work where they are paid personally.
The ATO recommends that before making an application, employees talk to their employers about the effect an exemption will have on pay and other entitlements.
An employer can disregard an exemption certificate and continue to make SG contributions. This may occur when an employer and employee do not reach agreement on the terms of an alternative remuneration package, or if there has not been enough time for an employer to adjust their payroll or other business system to discontinue contributions.
The employer and employee may come to an agreement to recommence super contributions at any point. This may be relevant where circumstances change and the employee no longer expects to exceed their cap.
Since the concessional contribution cap was reduced to $25,000, people on high incomes have had to make sure they fit under the limit.
Where an individual’s contributions (including those made by their employer) exceed the annual contribution cap, the excess is included in the individual’s assessable income and taxed at the marginal rate less a 15 per cent tax offset (representing the contribution tax).
The individual is also subject to a charge based on the shortfall interest charge to cover the late payment of the tax.
Individuals can choose to retain excess concessional contributions in their super fund as a non-concessional contribution or withdraw 85 per cent of the excess.