The Government’s decision to close off the loophole which allowed unscrupulous employers to count employees’ superannuation contributions against their own superannuation guarantee obligations has been broadly welcomed by the industry.
The Senate has not only backed the closing off of the loophole under Superannuation Guarantee Integrity legislation but has made it effective from 1 January, next year.
The Institute of Public Accountants (IPA) was amongst those welcoming the change, with the organisation stating employers had had more than enough time to stop the unscrupulous behaviour.
“The loophole came about where an employee salary sacrifices into his or her superannuation and the employer uses that contribution to form part of the employer’s obligation to pay the 9.5% SG,” IPA chief executive officer, Andrew Conway, said. “The loophole will now be closed.”
He said the integrity measure had been a long time coming and noted that legislation to fix the anomaly had been introduced to the Parliament in 2017 but lapsed before the election.
“The IPA advocated for the measure to be brought forward from its proposed date of 1 July 2020, to the start of this financial year namely 1 July 2019,” Conway said. “Employers have had enough warning of the Government’s intention to stop this unscrupulous behaviour. We are pleased that the Senate agreed with our position and recommended the measure to be brought forward to 1 January 2020.”
“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.”
Conway said it was ironic that whilst there was debate around increasing the SG to 12%, some employees might not have been receiving the current 9.5% while the loophole had been exploited.