Q: I have more than one job and last financial year I was close to breaching my concessional contribution cap. I understand the Government was looking at some changes to the super rules that would help people like me avoid this problem. How is that going?
A: Yes, the Government has reintroduced a bill that lapsed because of the election. The bill, Treasury Laws Amendment (2018 Superannuation Measures No.1) Bill 2019, includes an amendment that is designed to allow individuals to avoid unintentionally breaching their concessional contribution cap when they receive superannuation contributions from multiple employers.
Instead of receiving contributions, an employee may apply to the ATO to opt out of the superannuation guarantee in respect of an employer and negotiate with the employer to receive additional cash or non-cash remuneration.
The ATO can grant an “employer shortfall exemption certificate”, which avoids a finding that the employer has a super guarantee payment shortfall.
The ATO may only issue a certificate if it is satisfied that the employee would otherwise be likely to have excess concessional contributions for the financial year.
Since the concessional contribution cap was reduced to $25,000, people on high income have had to make sure they fit under the cap.
Where an individual’s contributions (including those made by their employer) exceed the annual contribution cap, the excess is included in the individual’s assessable income and taxed at the marginal rate less a 15 per cent tax offset (representing the contribution tax).
The individual is also subject to a charge based on the shortfall interest charge to cover the late payment of the tax.
Individuals can choose to retain excess concessional contributions in their super fund as a non-concessional contribution or withdraw 85 per cent of the excess.
The employer and employee may come to an agreement to recommence super contributions at any point. This may be relevant where circumstances change and the employee no longer expects to exceed their cap.
An employer may choose to disregard a certificate and continue to make contributions. This may occur when an employer and employee do not reach agreement on the terms of an alternative remuneration package, or if there has not been enough time for an employer to adjust their payroll or other business system to discontinue contributions.