• Skip to content
  • Skip to navigation

Grant Thornton Australia

Grant Thornton uses cookies to monitor the performance of this website and improve user experience.

If you are happy to accept cookies from this site, please check the box.

To find out more about cookies, what they are and how we use them, please see our privacy notice, which also provides information on how to delete cookies from your hard drive.

How to be COVIDSafe when visiting Grant Thornton offices. Find out how

Global site
  • Global site
  • Algeria
  • Botswana
  • Cameroon
  • Egypt
  • Ethiopia
  • Gabon
  • Guinea
  • Kenya
  • Libya
  • Malawi
  • Mauritius
  • Morocco
  • Nigeria
  • Namibia
  • Senegal
  • South Africa
  • Togo
  • Tunisia
  • Uganda
  • Zambia
  • Zimbabwe
  • Anguilla
  • Antigua
  • Argentina
  • Aruba, Bonaire, Curacao and St. Maarten
  • Barbados
  • Bolivia
  • Brazil
  • British Virgin Islands
  • Canada LLP
  • Canada RCGT
  • Cayman Islands
  • Chile
  • Colombia
  • Costa Rica
  • Ecuador
  • El Salvador
  • Grenada
  • Guatemala
  • Honduras
  • Mexico
  • Montserrat
  • Nicaragua
  • Panama
  • Paraguay
  • Peru
  • Puerto Rico
  • St Kitts
  • St Lucia
  • St Vincent and the Grenadines
  • Trinidad & Tobago
  • United States
  • Uruguay
  • Venezuela
  • Turks & Caicos
  • Afghanistan
  • Australia
  • Bangladesh
  • Cambodia
  • China
  • Hong Kong
  • India
  • Indonesia
  • Japan
  • Korea
  • Malaysia
  • Mongolia
  • Myanmar
  • New Zealand
  • Pakistan
  • Philippines
  • Singapore
  • Taiwan
  • Thailand
  • Vietnam
  • Albania
  • Armenia
  • Austria
  • Azerbaijan
  • Belarus
  • Belgium
  • Bosnia and Herzegovina
  • Bulgaria
  • Channel Islands
  • Croatia
  • Cyprus
  • Czech Republic
  • Denmark
  • Estonia
  • Finland
  • France
  • Georgia
  • Germany
  • Gibraltar
  • Greece
  • Hungary
  • Iceland
  • Ireland
  • Isle of Man
  • Israel
  • Italy - Bernoni
  • Italy - Ria
  • Kazakhstan
  • Kosovo
  • Kyrgyzstan
  • Latvia
  • Liechtenstein
  • Lithuania
  • Luxembourg
  • Macedonia
  • Malta
  • Moldova
  • Monaco
  • Netherlands
  • Northern Ireland
  • Norway
  • Poland
  • Portugal
  • Romania
  • Russia
  • Serbia
  • Slovak Republic
  • Slovenia
  • Spain
  • Sweden
  • Switzerland
  • Tajikistan
  • Turkey
  • Ukraine
  • UK
  • Uzbekistan
  • Bahrain
  • Egypt
  • Jordan
  • Kuwait
  • Oman
  • Qatar
  • Saudi Arabia
  • United Arab Emirates
  • Yemen
  • Lebanon
Grant Thorton Logo

Grant Thornton Logo Grant Thornton Logo

Contact us
  • Insights
  • Services
  • Industries
  • Meet our people
  • Careers
  • News centre
  • Locations
  • About us
  • Audit
  • Tax
  • Private Advisory
  • Financial Advisory
  • Grant Thornton Consulting
  • Asia
Audit Home
  • Audit methodology
  • Audit technology
  • Financial reporting advisory
Tax Home
  • Corporate tax
  • Employee equity reward schemes
  • Fringe benefits tax
  • Global mobility services
  • GST & indirect tax
  • International tax
  • Payroll assurance
  • Research & development
  • Tax compliance
  • Tax governance & risk management
  • Tax in mergers & acquisitions
  • Tax lawyers
  • Transfer pricing
Private Advisory Home
  • Family Business Consulting
  • Family office services
  • Private wealth
  • Superannuation
Financial Advisory Home
  • Corporate finance
  • Debt advisory
  • Forensic consulting
  • Payments advisory
  • Restructuring advisory
Grant Thornton Consulting Home
  • Business risk
  • Human capital
  • Performance improvement
  • Strategy & growth
  • Technology consulting
  • GNC Group Consulting
Asia Home
  • China practice
  • India practice
  • Japan practice
  • Agribusiness, food & beverage
  • Automotive dealers
  • Education
  • Energy & resources
  • Financial services
  • Health & aged care
  • Life sciences
  • Manufacturing
  • Not for Profit
  • Professional services
  • Public sector
  • Real estate & construction
  • Retail & consumer products
  • Technology & media
Agribusiness, food & beverage Home
Bite Size Dealtracker Food, Beverage & Agribusiness industry insights
Key insights for the Australian Food, Beverage & Agribusiness industry.
Financial services Home
  • Banking
  • Fintech
  • Private Health Insurance
  • Superannuation
  • Asset management
  • BEAR FAQs
  • Open banking
Royal Commission wrap up Top 10 things for Financial Services providers
Eleven months on from the first round of hearings for the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, Commissioner Hayne’s final report has been released.
Health & aged care Home
Aged Care Royal Commission Perspectives on the Future of Ageing
Transitions in ageing are not consistent and systematic as they are described by our ageing systems. Sometimes they are incremental, sometimes accidental, sometimes monumental, and they are always personal. We can create something better.
Life sciences Home
Biotechnology Industry Position survey Australia's biotechnology industry drives economic growth
The 2019 Biotechnology Industry Position survey conducted by Ausbiotech and supported by Grant Thornton has revealed that new technologies across regenerative medicine and medicinal cannabis are disrupting the industry, and Australia's global strength in clinical trials continues to drive contributions to the economic and social fabric of the country.
Manufacturing Home
mid-sized business report Manufacturing is critical to our economy – how can we support the sector?
Although the knock-on effects of the Australian automotive industry exiting our country are yet to be fully understood, the industry is evolving, and manufacturing continues to be a major employer and critical to our overall economy.
Not for Profit Home
NATIONAL OUTCOMES MEASUREMENT PROGRAM A practical framework
Royal Commissions and federal budgets are critical things for Nonprofit human service providers to be thinking about at this point in time.
Real estate & construction Home
mid-sized business report Supporting affordable housing requires planning, certainty – and tax reform
There is a lot of noise around the property sector at the moment – and it’s not all positive. Prices are down – but this shouldn’t be a surprise when some markets (namely Sydney & Melbourne) saw unprecedented hikes in recent years.
Retail & consumer products Home
GNC Group Consulting The Technology Trap: Online innovation in retail
I recently attended the NRF Retail Big Show in New York, an overwhelming smorgasbord of retail technology and new store concepts.
Technology & media Home
  • Telecommunications
Scaling-up for Growth From start-up to scale-up
Navigating the complexities of growth and maintaining previous success is a challenge for all mid-size businesses.
  • Working at Grant Thornton
  • Student opportunities
  • Experienced careers
  • Contact us
Working at Grant Thornton Home
  • Flexibility
  • Your career and development
  • Diversity and inclusion
  • In the community
  • What we offer you
Student opportunities Home
  • Graduates
  • Vacationer Program
  • The application process
  • FAQs
  • Student application tips and tricks
Experienced careers Home
  • Client spotlight
  1. Grant Thornton Australia | Audit, Tax and Advisory
  2. Client alerts
  3. 2017
  4. Superannuation guarantee changes - salary packaging impact

Superannuation guarantee changes - salary packaging impact

23 Oct 2017
  • Superannuation guarantee changes - salary packaging impact

The implications for employees and employers will depend on the employer’s current policies.

Effective 1 July 2018:

  • superannuation guarantee is proposed to be payable on the value of salary packaged superannuation, as well as cash salary; and
  • salary packaged superannuation cannot be applied to help meet the employer’s compulsory superannuation guarantee obligation.

Prior to then:

  • only the salary component of remuneration is subject to superannuation guarantee; and
  • salary packaged superannuation is lumped together with other employer superannuation contributions when testing whether the superannuation guarantee obligations have been met.

1. Superannuation based on pre-packaged salary

Most employers that offer salary packaging, currently pay superannuation on the “pre-packaged” salary amount, ie. prior to the deductions for salary packaged items. This treatment, therefore, means that compulsory superannuation is based on an amount inclusive of salary packaged superannuation, so for these employers, the changes will have no impact.

For example, assume a total remuneration package of $109,500 including superannuation. The employer’s current policy will be consistent with the legal requirement after 1 July 2018 and will include superannuation in the remuneration package as follows:

Salary and other benefits, including salary packaged superannuation, any FBT component etc. $100,00
Compulsory superannuation (9.5% of pre-packaged salary) $9,500
Total remuneration package $109,500

 2. Superannuation based on reduced salary – total package approach

Some employers allow employees to reduce the compulsory superannuation component of their remuneration package when salary packaging. These employees are no worse off, as their total remuneration package value is maintained, but they have more flexibility regarding how much of their package is made up of superannuation. That is, compulsory superannuation is based on the salary component (as reduced after salary packaging) and the employee has the option to salary package a further amount of superannuation and/or other benefits, as they wish.

For example, the same $109,500 total remuneration package, might be structured as follows:

Salary $80,000
Compulsory superannuation (9.5% of salary) $7,600
Salary packaged superannuation $1,000
Other benefits, including any FBT component etc. $20,900
Total remuneration package $109,500

The proposed changes will remove this option, to the extent that compulsory superannuation must be applied to the salary and salary packaged superannuation components. So the above remuneration package could be changed as follows in order to comply with the proposed new rules:

Salary $79,913
Salary packaged superannuation $1,000
Compulsory superannuation (9.5% of salary) $7,687
Other benefits, including any FBT component etc. $20,900
Total remuneration package $109,500

3. Superannuation based on reduced salary – ‘salary plus’ approach

The type of arrangements towards which the proposed changes are actually targeted, are where the employer pays superannuation on the reduced salary component only and does not maintain the total remuneration package value, and where the employer treats salary packaged superannuation as helping to meet its superannuation guarantee obligation.

So for example, the package referred to above, might have been set at $100,000 salary plus superannuation. This would equate to a total package of $109,500 if the employee did not salary package any benefit. With salary packaging, the total package might be reduced, as follows:

Salary $80,000
Other benefits, including any FBT component etc. $20,000
Compulsory superannuation (9.5% of salary) $7,600
Total remuneration package $107,600

Further, if the employee had salary packaged some superannuation, an unscrupulous employer might have used this to reduce the compulsory contribution amount, as follows:

Salary $80,000
Salary packaged superannuation  $1,000
Other benefits, including any FBT component etc. $19,000
Compulsory superannuation (9.5% of salary) $6,600
Total remuneration package $106,600

The proposed changes will fix the second problem, but will not fix the first problem in its entirety. The first problem is only addressed to the extent the employee has salary packaged additional superannuation. Salary packaging of other types of benefits is not taken into account.  

The proposed changes will require any salary packaged superannuation to be identified and compulsory superannuation to be paid on this amount. For instance, the total package might look like the following:

Salary $80,000
Salary packaged superannuation $1,000
Compulsory superannuation (9.5% of salary) $7,695
Other benefits, including any FBT component etc. $19,000
Total remuneration package $107,695

Some other points to note and action to take

  • The relevant legislation is currently before the House of Representatives.
  • The quarterly ‘ordinary time earnings base’ (comprising ordinary time earnings and salary packaged superannuation) remains subject to the limits of the maximum contributions base – currently $52,760 per quarter.
  • Salary packaged superannuation and compulsory employer superannuation both still count towards the $25,000 concessional cap.
  • If you currently operate in scenarios 2 or 3 above, consider changing your policies to fit within scenario 1.
  • Consider whether you are ready for Single Touch Payroll Reporting – ie. immediate reporting to the ATO of PAYG and superannuation as employees are paid – also coming in from 1 July 2018 for employers with more than 20 employees.

For more information, please contact your usual Grant Thornton advisor, or:

Elizabeth Lucas
Elizabeth Lucas
Partner & Head of National Specialist Tax Melbourne
Email address https://www.linkedin.com/in/elizabeth-lucas-37209848/ Elizabeth Lucas VCard
View full profile
Share this page
  • Share this page on Facebook LinkedIn
  • Share this page on Twitter Twitter
  • Share this page on LinkedIn LinkedIn
  • Share this page on Wechat WeChat
  • Share this page via email Email
  • Grant Thornton on Youtube
  • LinkedIn icon
  • Twitter icon
  • Facebook icon
Connectclose
  • Contact us
  • Locations
  • Meet our people
  • Subscribe
  • Staff portal
Aboutclose
  • About us
  • Careers
  • News centre
  • Client alerts
  • Grant Thornton Foundation
  • Grant Thornton Affinity
Legalclose
  • Privacy
  • Compliance and ethics
  • Disclaimer
  • Site map

© 2021 Grant Thornton Australia Limited – All rights reserved

    • EN
    • Contact us