Superannuation change for High Income Earners

Some high income earners who work with multiple employers have found that they breach the superannuation concessional contribution level of $25,000 by virtue of the superannuation guarantee paid on their salary. Until now, there has been no way of avoiding the breach. Whilst a touch long winded, relief from punitive tax is now available.

The Treasury Laws Amendments (2018 Superannuation Measures No. 1 ) Bill 2019 passed through Government on 19 September 2019 and received Royal Assent on 2 October making it law. The bill in short allows certain employees to apply for an exemption through a prescribed form that has the affect of limiting the superannuation contributions from all sources to the concessional contribution limit.

The mechanism protects the employer from superannuation guarantee shortfall and enables the employee to receive more cash out of the superannuation environment. In the short term, software providers will scramble to enable their programs to manually override the 9.5% superannuation guarantee and the ATO will be called upon to provide the forms required by the law to make the exemption happen.

Whilst only affecting a relatively small proportion of taxpayers, it is evidence of a common sense approach to tax administration. If a single employer is not required to pay super guarantee in excess of the contribution limit, it is entirely logical that multiple employers have some mechanism to achieve the same outcome. Logic and tax do not always go together so it is always nice for tax professionals to see things come across the desk that actually make sense without merely adding complexity to an already incredibly complex world.

The employee is required to apply for the certificate and can only do so for an existing employer meaning you can't prospectively apply for a reduction in expectation of employment, rather after the event of employment.

Should you be in this category, give your tax agent a ring and ask for help in avoiding unnecessary interest and penalties by breaching your contribution cap.