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Government changes to legislation mean that the superannuation guarantee will remain at 9.5% until at least 1 July 2021

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By James Sanders, Lawyer, MST Lawyers

The Government has struck a deal with the Palmer United Party to repeal the mining tax.

As part of the deal, the Government will put on hold the planned increases to the superannuation guarantee contribution, by freezing it at the present 9.5% until at least 1 July 2021. It will then increase half a percentage point ever year after that until it hits 12%.

The freezing of the superannuation guarantee rate has, for now at least, put to bed the issue of who pays for the superannuation guarantee increase. Whilst employers are required to make the superannuation guarantee contributions, employees who are paid an annual package, inclusive of superannuation, often bear the cost of the increased contributions through a reduction in take home pay.

Reducing superannuation contributions through salary sacrifice arrangements

Employers can come to an agreement with employees to salary sacrifice some of their pre-tax earnings into their superannuation.

By doing this, employers can offset superannuation guarantee contributions by the amount that is salary sacrificed. If the salary sacrificed superannuation contribution is more than the minimum superannuation guarantee an employer is required to pay, then the employer would not be required to pay any additional superannuation on top of the salary sacrificed amount.

Employers need to remain aware of any relevant award, workplace agreement or employment contract that applies to an employee. The terms of these awards or agreements may not allow for salary sacrificed superannuation to be offset against any the superannuation guarantee.

For further information please contact our Employment Law and Workplace Safety team by email workplace@mst.com.au or by telephone +61 3 8540 0200.