The Institute of Public Accountants (IPA) has called on the Government to close-off the loophole which it says is allowing employers to rip off the salary sacrifice contributions of employees.
The IPA chief executive, Andrew Conway, said that immediate action was needed to stamp out what amounted to wage theft when employers counted the employee’s salary sacrifice contribution as part of the employer’s 9.5 per cent obligation.
“To make things worse, employers can calculate SG obligations on a (lower) post salary sacrifice earnings base,” he said. “Employees who salary sacrifice to boost their superannuation savings may end up with lower superannuation contributions than they expect.”
Conway said that while it was to be hoped that most employers did the right thing by their staff wage theft would continue while the loophole still existed.
“In 2017, there was a Bill to fix this anomaly but it lapsed due to the election. The integrity measure is now part of a new Bill before Parliament, which will close the loophole but even if the Bill is passed, the start date is not until 1 July 2020,” he said.
“When someone undertakes a salary sacrifice into superannuation they are attempting to provide sufficient savings to live more comfortably when they retire. They are sacrificing spending money today to build their nest egg which is a good thing as it means less reliance on Government support in retirement.
“No one would undertake such a strategy if they knowingly knew that their hard-earned dollars were being used to offset their employer’s SG obligations. It’s counter intuitive to think otherwise.
“This situation needs to be rectified as quickly as possible to cease the opportunity for potential wage theft. It’s ironic that whilst we are discussing an SG increase to 12 per cent, some employees will not be receiving the current 9.5 per cent while this loophole exists.” Conway said.
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