The purpose of this Circular is to advise you of the implementation of salary sacrifice for superannuation for non-Senior Executive Service (SES) employees.

On 25 August 1998 the following awards were varied by consent to provide for optional salary sacrifice for superannuation:

• Crown Employees (Public Sector - Salaries June 1997) Award
• Crown Employees (Senior Officers) Award
• Crown Employees (Wages Staff) Rates of Pay Award

The main features of this initiative are:

• salary sacrifice arrangements must be formalised by an agreement between the employee and the employees Department or agency;
• the agreement to salary sacrifice must be prospective, that is, it must be made prior to the commencement of the period of service to which it relates;
• salary sacrificed for superannuation will be deducted from salary payable prior to PAYE tax;
• the amount sacrificed, together with any other packaging arrangements, must not exceed 30% of award salary or superannuable salary whichever is the lesser;
• for the purpose of superannuation legislation, the sacrificed amount is deemed to be additional employer contributions and may be paid into First State Super or, with the Departments or agencys agreement, paid into a private sector complying superannuation scheme; and
• other entitlements, such as overtime and leave loading, are protected by the award variation and therefore payment for these entitlements will be at the employees pre-sacrifice salary rate.

The Government is committed to allowing all non-SES public sector employees to have access to these arrangements. For the purpose of superannuation Acts constituting the defined benefits schemes, the Premier has approved of salary sacrificed for superannuation being an 'approved employment benefit', provided it does not exceed 30% of superannuable salary.

Guidelines to assist Departments and agencies implement and administer this initiative are attached. Also attached is an information sheet for distribution to employees. This sheet should be reproduced in languages that reflect the ethnic makeup of the organisations workforce.

Your attention is drawn to the following aspects of the Guidelines:

• It is important that employees understand that salary sacrificed is generally unable to be accessed until retirement age is attained and that ultimate returns on additional contributions are dependent on the performance of the selected fund. Therefore, the Guidelines stress the importance of employees obtaining professional financial advice prior to entering into a salary sacrifice arrangement.
• Departments and agencies are encouraged to develop their own policies on the range of funds to which they will allow additional contributions to be made (Section 3) and the frequency of changes an employee may make to their sacrificed amount (Section 6.2).
• Salary sacrifice must be truly optional for employees and can be cancelled at any time subject to sacrificed amounts being retained in the selected fund (see first dot point).
• A sample agreement form is attached at Appendix 3.

Department Heads may enter into agreements with employees for salary sacrifice for superannuation in accordance with the attached guidelines.

Public Sector employers are encouraged to vary relevant industrial instruments to provide for this initiative. A sample award variation is at Appendix 1 in the Guidelines.

Salary sacrifice for superannuation may now be implemented. It is acknowledged that many existing payroll systems will require modification to allow for pre-PAYE tax arrangements and that this will affect the timing of implementation in a number of organisations.

Any enquiries may be directed to Annemarie Vu (superannuation policy matters) on telephone number (02) 9228 3527 or Doug Cowell (administrative and other issues) on telephone number 9229 3575.

C. Gellatly
Director-General