MTA EMPLOYMENT RELATIONS FACT SHEET. Superannuation

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1 MTA EMPLOYMENT RELATIONS FACT SHEET Superannuation Updated May 2013 Maximum contribution earning base Compliance with the superannuation legislation is measured on a quarterly basis. The legislation requires that employers need only make contributions on earning up to the maximum contributions base. This amount is indexed annually. Please note: The Superannuation Maximum Contribution Base (i.e. cap) for is $48,040 per quarter. This means payments to employees in excess of this amount will not attract superannuation contributions. I.e. no more than 9.25% per quarter needs to be paid per employee regardless how much money they earn. This cap is indexed each year and generally available just prior to the new financial year. Exemptions Whilst the Superannuation Guarantee (Administration) Act 1992 is intended to cover all employees, (award or non-award) which includes directors, managers and contractors, it specifically excludes sole proprietors, principals of a business who are the employing entity or partners or partnerships. Those members who engage contractors must look carefully at these arrangements to assess liability (if any). As hinted above, the provisions of the Superannuation Guarantee (Administration) Act 1992 states an employee includes a person employed under a contract that is wholly or principally for labour. In other words, if more than half the value of the contract is for the person s labour, they will fall into this category, meaning the contractor may be considered to be an employee for superannuation purposes. This is the case even if the contractor quotes an Australian Business Number. It should also be noted that labour includes mental and artistic effort as well as physical work.

2 Choice of Superannuation Fund Employers must have a nominated superannuation fund and this fund must comply with the relevant industrial instrument(s) in place (e.g. Awards and Enterprise Agreements). Employees are not required to complete the Standard Choice Form, and if they do not, employers must pay their employee s superannuation contributions into their default superannuation fund. The Standard Choice Form must be given to employees within 28 days of: A request by an existing employee; A new employee commences their employment; The company is no longer able to contribute to the employee s chosen fund; The employee s chosen fund ceases to be an eligible fund. Records Employers are obligated to keep records for 5 years: Showing when the Standard choice form was provided to all eligible employees; Details of employees who do not have to be offered a choice of superannuation fund form; Receipts or other documents issued by the superannuation fund showing you have made superannuation contributions to an employee s chosen fund; and A record confirming your default superannuation fund is a complying fund and meets the life insurance requirements. Penalties Employers who fail to give new employees the Standard Choice Form or act on their existing employee s choice of fund request, may be liable for choice liability under the Superannuation Guarantee Charge. You will also be subject to the superannuation guarantee charge if you impose a fee on employees for implementing their choice of superannuation fund. Please note: Unless licenced by ASIC to provide financial advice, employers should not make recommendations about the superannuation fund an employee should choose, the level of contributions, fees, performance of the fund or whether funds should be consolidated into a single superannuation fund. Employers may be liable for any losses incurred by an employee acting on your advice or representations. Superannuation and the Award What is an eligible superannuation fund? There are many superannuation funds on the market. Some are self-managed, some are publicly listed companies. From 1 July 2005, employers can choose which fund they prefer as long as it meets

3 ATO requirements. Employers are obligated to give their new employees a Standard Choice Form within 7 days of commencement which enables them to choose their own fund. If an employee does not choose their own fund, the employer will then need to make the superannuation payments to the employer s default fund. A default fund must be a fund which is listed in the Award which governs the employee. Currently the Vehicle Manufacturing, Repair, Services and Retail Award 2010 lists the following funds: (a) MTAA Superannuation Fund; (b) Australian Super; (c) Labour Union Cooperative Retirement Fund; (d) TWUSUPER; (e) CareSuper; (f) Statewide Superannuation Trust; (g) Tasplan Ltd; or (h) Retail Employees Superannuation Trust (REST); or (i) Any superannuation fund, to which the employer was making superannuation contributions for the benefit of its employees before 12 September 2008, provided the superannuation fund is an eligible choice fund. Superannuation and Workers Compensation The Superannuation Guarantee Ruling SGR 2009/2 states generally: Total Incapacity When an employee is totally absent from their workplace (i.e. no light or suitable duties are being undertaken by the injured employee), monies which are paid to the employee by the insurer is not counted for the purposes of ordinary time earnings. Partial Incapacity Any workers compensation payments received by an injured employee for the hours the employee performs or attends work, forms part of the ordinary time earnings. However if an employee is paid for hours not worked, or is paid upon termination, the monies are not counted as salary or wages and therefore are not counted for the purposes of ordinary time earnings (NOTE the award contains extra provisions). Award Note Many awards place additional obligations on employers to make additional contributions. For example, the Vehicle Manufacturing, Repair, Services and Retail Award 2010 provides that subject to a 52 week limit, ANY period of work related illness or injury is counted as ordinary time earnings. This generally means that any monies received from an insurer for workers compensation will incur superannuation contributions. Member should contact your association for further advice. To view the superannuation guarantee ruling SGR 2009/2 please click here.

4 Salary Sacrifice and Superannuation Salary sacrifice is an arrangement by which an employee agrees to forego part (or all) of their future salary or wages in return for their employer providing benefits of a similar cost. The contract which is drafted up by the employer and employee regarding salary sacrifice does have limitations which include: There must be no access to the sacrificed salary; The arrangement must be made before your employee is entitled to payment; Superannuation contributions must be made to a complying superannuation fund; Although having a salary sacrifice arrangement with an employee can be both rewarding to the employer and in particular the employee, the MTA recommend that member s employees contact their accountant or financial advisor prior to entering into this type of arrangement to avoid any unintended taxation liabilities. Please note: An employee for whom excessive deductible contributions are made may be penalised. Where excessive deductible contributions are made for an employee, the employee is penalised by additional tax being imposed on the contributions. Instead of being taxed at 15% in the fund on contributions in excess of the concessional albeit, they are taxed at 46.5%. Can leave entitlements be sacrificed? Leave entitlements can only be sacrificed before an employee has fulfilled the conditions to be eligible to take leave. This means that leave entitlements already owed to your employee cannot be sacrificed, but leave entitlements they will be entitled to in the future can be sacrificed. So, if an employee has completed sufficient service to take long service leave, or has accrued leave that can be paid in cash on termination of employment, then a leave entitlement has accrued and this entitlement cannot be salary sacrificed. MTAA Industry Superannuation Fund Motor Traders Association of Australia Industry Superannuation Fund

5 Please note: If the contractor engaged is a proprietary limited company then an employer can contract out of the need to pay superannuation and incorporate contractual provisions to this effect. This does not apply if the contractor is a sole trader or partnership. These members using the MTAA Industry Superannuation to make contributions on behalf of their employees may continue to use this fund. Members are encouraged to list the MTAA Superannuation Fund as the employer nominated fund in Section 2 of Part A on the standard choice form. Members who have not used the fund previously may also utilise the fund as the employer nominated fund. Members should also be mindful that the MTAA Superannuation Fund is also a public offer fund and members and their family and friends too may enjoy the benefits of this industry fund. As an industry fund, MTAA Super is run only to profit members and not shareholders, and we do not pay commissions to sales agents. Members can use the MTAA Super Calculator to estimate retirement balances, see the impact of voluntary contributions or salary contributions. It is simple to use and understand. Just enter your details and click submit. You will then see a graph outlining your retirement balance (lump sum) using the details you entered, and a projection of your balance if you made additional contributions. You can then enter new values as an extra scenario to compare your existing details and projected account balances. To access the MTAA superannuation calculators click here. To view the MTAA superannuation member handbook please click here.

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