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The hidden danger of salary sacrifice agreements 

November 2013

If you haven't reviewed your salary sacrifice arrangement for a while then two recent changes should spur you into action. 

The first is the increase to the super guarantee (SG) rate from 1 July 2013.  While the increase from 9% to 9.25% doesn't sound like a lot, it can have a big impact, particularly with concessional contribution caps. 

Take the example of a 55-year-old man who earns $160,000 per annum.  Before 1 July, his employer paid the SG amount of 9% ($14,400) and he salary sacrificed $10,600 to use his full concessional cap.  From 1 July, he will need to reduce the amount he sacrifices by $400 or breach his cap. 

It's such a minor amount but without this change the ATO will include the excess $400 contribution in the employee's assessable income, which will then be taxed at Wilbur's marginal tax rate with additional penalty interest charges applying. 

If you have a salary sacrifice arrangement in place and are close to your contribution cap, then the increase to the SG might be enough for you to breach your limits. 

The second change relates to the increase in the concessional contributions cap. This financial year, the concessional contributions cap is $35,000 for those 59 and over on 30 June 2013 and $25,000 for everyone else.  The higher cap will allow an additional $10,000 to be salary sacrificed into super for those eligible.

If you have staff who are salary sacrificing into their super, now's the time to review your arrangements. Please contact us on 02 9957 4033 or via email to book an appointment with a member of our team. 

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Last updated November 2013. This article is provided for information purposes only and should not be used in place of advice from your accountant. Please contact us on 02 9957 4033 to discuss your specific circumstances.

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Disclaimer

This article is provided for information purposes only and correct at the time of publication. It should not be used in place of advice from your accountant. Please contact us on 02 9957 4033 to discuss your specific circumstances.

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