The legislation governing the State Authorities Superannuation Scheme (SASS) was recently amended to allow the salary sacrifice of compulsory member contributions from 1 April 2007.

A SASS member will be able to pay some or all of their compulsory member contributions from their before-tax salary through a salary sacrifice agreement with their employer.

State Super will provide detailed information by letters to employer agencies in the near future and continue to assist individual agencies as required. The purpose of this Circular is to provide preliminary information on matters of immediate concern to agencies and their employees.

No change to the process by which members elect their compulsory contribution rate
There is no change to a SASS member's obligation to pay contributions to the scheme, the calculation of employer financed benefits, or the process for members to advise State Super of their percentage rate of contribution to the scheme.

As occurs each year, State Super recently provided every SASS member with their Annual Statement and State Super's SASS Contribution Election Form. These forms are only to be completed by members who want to vary their current percentage rate of contribution and must be submitted to State Super by 31 December 2006. The variation to the percentage rate of contribution will take effect on 1 April 2007. As is currently the case, a member may elect with State Super to contribute 1, 2, 3, 4, 5, 6, 7, 8 or 9 percent of their superable salary.

Due to the new opportunity to salary sacrifice their compulsory contributions, some SASS members may now be uncertain about whether they should vary their current percentage rate of contribution. Employees should be advised to seek independent financial advice to assist them in this decision which must be made on the basis of their own individual circumstances.

Process for electing to salary sacrifice compulsory contributions in SASS
The legislative amendments enabling the salary sacrifice of SASS contributions reflects Government policy to provide this arrangement for all SASS members. Employers are encouraged to facilitate the implementation of SASS salary sacrifice from 1 April 2007.

Salary sacrifice of superannuation contributions is only valid under taxation law if there is an agreement between the employee and their employer. Agencies need to develop processes to allow SASS members to elect to salary sacrifice some or all of their compulsory contributions. These processes should be similar to those already in place for salary sacrificing of superannuation contributions to First State Super. The main difference is that agencies need to ‘gross up' the salary sacrificed compulsory SASS contributions to cover the superannuation contributions tax payable by the member.

State Super will provide agencies with detailed information on the ‘grossing up' of compulsory SASS contributions to supplement the information sent to SASS members with their Annual Statements.

A calculator will also be available on State Super's website, www.statesuper.nsw.gov.au, in early 2007 to assist members and agencies.

Agencies should note that the amendments allow SASS members to salary sacrifice some or all of their compulsory contributions. For example, a SASS member who has elected with State Super to contribute at the rate of 9% of their superable salary may elect with their employer to have 3% of their superable salary paid on an after-tax basis, and the remainder on a before-tax (salary sacrifice) basis.

Elections to make SASS compulsory contributions through salary sacrifice must be lodged with the member's employer. They should not be lodged with State Super.

State Super has indicated a preference for agencies to implement self-assessment as a means of simplifying the administrative arrangements associated with the remittance and reconciliation of member contributions. Enquires regarding self-assessment should be directed to State Super.

Existing salary sacrifice arrangements
‘Optional' salary sacrifice contributions are the superannuation contributions SASS members may currently pay on a before-tax basis to First State Super (FSS) or another complying superannuation fund. These optional contributions are in addition to the compulsory contributions that SASS members must pay into SASS. The current arrangements for optional contributions will continue.

SASS members should be advised to seek independent financial advice about all their salary sacrificing superannuation contributions and other salary packaging commitments. This advice should cover their eligibility for the Commonwealth Government Co-contribution and changes to the taxation of superannuation benefits and contributions proposed by the Commonwealth Government.

Further assistance
SASS members may contact State Super on 1300 130 095 for information about their superable salary and their percentage rate of contribution to the scheme. Information is also available on State Super's website, www.statesuper.nsw.gov.au

For information about making a salary sacrifice election, SASS members should contact their Human Resources or payroll managers.

Agencies should contact their Employer Relationship Officer at Pillar Administration or visit State Super's website, www.statesuper.nsw.gov.au

C Gellatly Director-General