Do you have more than one employer? Does the combined value of the Superannuation Guarantee (SG) contributions from all your employers currently exceed the allowable concessional contributions cap of $25,000 per annum?
If you answered ‘yes’ to both of these questions, you need to read on.
What has changed?
Recently, there has been new legislation passed by Parliament, whereby employees with multiple employers now have the option to elect out of receiving SG contributions from an employer, if that SG amount will result in the employee exceeding their annual concessional contributions cap.
The employee can now apply to the ATO Commissioner for an Employer Shortfall Exemption Certificate (ESEC).
What is an ESEC and how does it work?
The ESEC is a certificate which allows employees with multiple employers, who will unintentionally exceed their annual concessional contributions cap, to elect out of SG contributions being made by a specific employer for a specific quarter of the financial year.
The certificate waives the usual SG charge for the employer if they fail to contribute the minimum superannuation contribution percentage required by law to be paid for their employee.
Instead of the SG contributions being paid, the employee and employer can effectively negotiate for the payment to be made under one of the following cash or non-cash remuneration alternatives, which could include, but is not limited to:
- Additional cash (taxable income)
- Time off (i.e. Annual Leave)
- Discounted Memberships
- Mentoring Programs
- Free or Discounted Educational and Training Opportunities
- Flexible Work Hours, and/or
- Other non-monetary benefits specific to individual’s need.
The ESEC does not stop an employer from paying super contributions, it’s only effect is to remove the liabilities/consequences of an employer failing to make any contributions for the quarter covered by the ESEC.
So, what does this mean for you?
If you are an employee with multiple employers who is at risk of exceeding your annual concessional contributions cap, you are likely to be eligible to apply for the ESEC.
If you would like a better understanding of how this new legislation might help you, please get in touch with a Findex SMSF adviser and we will answer any questions you have to enable you to make an informed decision.