C2007-30 Commonwealth Superannuation Changes Which May Affect Employees' Salary Sacrifice Decisions

The Commonwealth 'Simpler Super' measures introduce caps on the amount of 'employer' contributions to superannuation. Employer contributions include those salary sacrificed to superannuation.   From 1 July 2007, a cap of $50,000 (indexed) per year applies to employees under 50 years.    For employees aged 50 or over, the cap is $100,000 per year until the 2012/13 financial year.  Employer contributions over these amounts are taxed at the top marginal rate instead of the concessional 15% rate.   Public sector employees need to know the amount of employer contributions that count towards the cap.  This is straightforward for accumulation fund members (see below).  In the defined benefit funds, State Super will issue information to all members in mid-July about how to work out the employer contributions that count towards the cap.   Members of accumulation schemes such as First State Super Employer contributions (usually 9% of salary) plus any salary sacrifice contributions will count towards the cap.   For an SES Officer the total amount of superannuation contributions deducted from the Total Remuneration Package will count towards the cap.   Members of defined benefit schemes (SSS, SASS and Police Super Scheme) Under Commonwealth rules, trustees of defined benefit superannuation funds will calculate the employer contributions that count towards the cap.    Defined benefit scheme members should not have to worry about how much they salary sacrifice into their defined benefit scheme.   However, defined benefit fund members will have to work out how much they can salary sacrifice into another fund, such as FSS, as additional contributions to another fund might put an individual over the cap.   Amount of employer contributions to defined benefit schemes The actual amount of employer contributions paid into (or owing to) the defined benefit schemes is not relevant to the cap.   The amount deducted from the Total Remuneration Package and shown on payslips for SES Officers is also not relevant to the cap.   Agencies are advised to review information from State Super as soon as it becomes available.  This information will enable members to determine the amount of salary sacrifice contributions (if any) they can make to another scheme without exceeding the cap.   Alex Smith Acting Director General