The May Federal Government Budget announcement included important changes to the way salary sacrifice to super will be treated.

The first change affects super contributions maximums, or caps. In the 2009 - 2010 financial year, the concessional contributions cap (for employer contributions, including salary sacrifice) will reduce to $25, 000 per person. For those aged 50 and over, the cap will reduce to $50,000. The non-concessional contributions cap (for after tax contributions) will be calculated at six times the concessional cap, so it remains at $150,000 in 2009 - 2010.

Note that the reduced limits apply to contributions received during 2009 - 2010, even if some of those contributions relate to employment before 1 July 2009.

The second change will see some forms of salary sacrifice super contributions included as 'non-wage remuneration' in various income tests for individuals. These include contributions that have been made by an employer or associate of the employer, for which the individual has or might reasonably be expected to influence the size of the contribution or the way the amount is contributed.

These contributions are called Reportable Employer Superannuation Contributions, or R E S C s, and from 1 July 2009, you'll be required to report RESCs in PAYG annual withholding reports and employees' PAYG summaries.

Speak to Taxwise (08-9248-8124) or our resident financial adviser, Mark Christie (08-9344-6495) to make sure you're prepared for these changes, and that any affected employees are aware of the potential taxation implications of their salary sacrifice to super.

About the Author

Warren Kruger is an Australian Tax Specialist and Advisor.

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