Super guarantee opt-out for high income earners with multiple employers

The Government has passed legislation that provides a possible exemption from employer superannuation guarantee requirements, where the individual is a high-income earner with multiple employers.

Under the existing rules, an employer is required to pay a minimum superannuation guarantee, currently 9.5%, of an employee’s ordinary time earnings. This is limited by the ‘maximum super contribution base’ which is currently $55,270 income or $5,250 superannuation contributions each quarter. These requirements apply to each employer, regardless of whether an employee has multiple employers.

The annual concessional contributions cap is $25,000 per person. The consequences of exceeding this cap will depend on your personal circumstances, but at a minimum the excess amounts will be taxed at the individual’s marginal rate and result in some extra administration to deal with.

Under the new rules, eligible individuals will be able to apply for an exemption certificate from the ATO, which they can then present to their employer to relieve them of the superannuation guarantee requirements. An employee will be eligible if they have more than one employer and expect that the combined employers mandated concessional contributions will exceed their concessional contributions cap for a financial year.

The certificate does not affect contractual obligations which may otherwise exist, for example where written into an employment agreement or a workplace award. Importantly, an employer may still choose to disregard the certificate and accordingly, the matter should be discussed with an employer first before applying.

The exemption is now available and requires the applicant complete the ATO form ‘Super guarantee opt-out for high income earners with multiple employers’ (NAT 75067). The form must be lodged 60 days before the first quarter in which an exemption is sought. An exemption for the upcoming quarter commencing 1 April 2020 will need to be lodged by 31 January 2020.

This strategy may not benefit everyone. With superannuation forming an important part of an employee’s retirement planning, you should seek professional advice to see if this strategy may benefit you or to discuss the tax implications.

For more information, please refer to the ATO release or contact us to discuss.

This article provides general information only and is not intended to provide specific advice. You should take professional advice before making any such decisions.