Making super contributions for an employee under an effective salary sacrifice arrangement may have benefits for both employers and employees. If salary-sacrificed super contributions are made to a complying super fund, the sacrificed amount is not considered a fringe benefit for tax purposes. You will not be liable to pay fringe benefits tax on the super contributions and the contributions will not be included as a reportable fringe benefit on your employee’s payment summary. Salary-sacrificed contributions are treated as employer contributions.
However, salary-sacrificed super contributions (in excess of mandated contributions) must be reported on your employee’s payment summary as reportable employer super contributions.
If the employee is under 75, you can claim a deduction on all employer super contributions, including salary-sacrificed contributions you make on behalf of your employees. The sacrificed component of your employee’s total earnings is not part of their assessable income for tax purposes. This means the sacrificed component is not included as income on their payment summary and is not subject to Pay As You Go (PAYG) withholding tax. Instead, it is taxed in the employee’s complying super fund at a concessional rate. Reportable employer super contributions are not included in your employee’s assessable income. However, these contributions are included in the income tests for some benefits and obligations. For details see income tests on the ATO website (www.ato.gov.au > Individuals > Income and deductions > Income tests).
If you enter into an arrangement with your employee to make post-tax super contributions on their behalf, make sure these contributions are paid to the super fund promptly, in accordance with the terms of their employment and any legal requirement (i.e. industrial award conditions).
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