The concept of a superannuation guarantee – the legal requirement for your employer to contribute 9.5% of your salary into a nominated super account – should be familiar to everyone, as it makes up the bulk of most people’s future retirement income. You may also salary-sacrifice amounts of your salary to put extra into your super.
Until recently, loopholes in the law meant that your employer could count your salary-sacrificed amounts towards their super guarantee contribution amounts – essentially working against your intention to boost your super. Employers could also calculate their super guarantee obligations based on your post-sacrifice earnings rather than on your full pre-sacrifice earnings.
Depending on your employment agreement, these loopholes meant that if you salary-sacrificed an amount equal to or more than your employer’s super guarantee amount, your employer could choose to not contribute any amount and the legal requirements of the super guarantee would still be met.
TIP: It’s important to note that this wasn’t the original intention of the law, and not all employers would choose to exploit these loopholes. However, where they did, employees who salary-sacrificed could be short-changed and end up with lower super contributions as well as a lower salary overall.
The good news is that the law has now been changed. From 1 January 2020, amounts that you salary-sacrifice to super can’t be used to reduce your employer’s super guarantee obligations, and employers must calculate their super guarantee obligations based on all of your ordinary time earnings (OTE), including any amounts you sacrifice into superannuation that would have otherwise been OTE.