SPAA proposes employee opt-out clause for employer superannuation guarantee

The Self-Managed Super Fund Professionals’ Association of Australia is proposing a new opt-out clause for employees who can show they will breach the contribution caps on their accounts if their employers continue to distribute super payments.

The proposal sent to Treasury comes as the SPAA has said several of its members have been punished by the Australian Taxation Office for exceeding their concessional caps by receiving contributions from several employers.

Sharyn Long, chairman of the SPAA, says the proposal will mostly affect higher income workers who may hold a number of different directorships or senior management roles. She also says this could affect contract workers in the IT and health industries as well.

“We fell the excess contribution charges are quite unfair. Employees end up paying a huge amount of tax through no fault of their own, and while the commissioner has some discretion they have to go through a huge amount of hoops.”

“And they are essentially trapped in this circumstance because the law requires those employers to continue making payments.”

The charges on excess contributions over concessional caps can be quite substantial, Long points out, with charges sometimes reaching as high as 93%.

Long points out that under laws to come into effect on July 1, 2012 for members over the age of 50, a $50,000 cap applies contributions made by, or on behalf of, a member of a super fund for a financial year. However, Long says an employer’s 9% obligation does not take into account other salary and wages paid by separate employers.

The SPAA says employees who will be affected can write to their employer under the new proposal, saying they are no longer liable for super contributions. The employee would have to show evidence demonstrating their cap would be exceeded, and this arrangement would remain in place for a full financial year or until removed by the worker.

Long says this may mean some employers could essentially save money by no longer having to distribute payments. But she also says this depends on individual contracts.

“It really depends on how the super arrangements work. Some senior workers may have a package inclusive of super, while others may have it on top of salary, or so on. IT depends on how that work, but some businesses could forego those payments.”

Long also says the submission contains a protest against one aspect of super laws – the ability for employers to make super payments for one quarter several weeks after that quarter has finished.

Long says the ability for employers to make super contributions for one financial year several weeks after that financial year has finished is quite unjust, and could tip an employee over the cap.

“At the moment, employers have until the end of July to make contributions for the June quarter and they can request an extension for that. It seems ludicrous that this can happen… they should make those contributions at a time when they could breach the cap, not several weeks after.”

While Long says the SPAA fully supports the 9% guarantee, she also says this should not punish employees who are in danger of breaching the caps.

“Employees who breach caps due to their employer’s compliance with the law should not be penalised for this,” she says. “Workers who have more than one employer should not be punished.”