Protection from Superannuation Guarantee Charge for high income earners with multiple employees
The government has introduced legislation which will prevent high income taxpayers with multiple employers from overpaying their superannuation contributions which results in an Excess Contributions Charge each year. This will be especially welcome for medical practitioners who often fall victim of this system.
Currently employers have a requirement to make a minimum Superannuation Guarantee Charge (“SGC”) of 9.5% on income up to a maximum of $263,156. However, this threshold applies to each employer that an employee may have so the maximum threshold can be duplicated a number of times.
Medical practitioners to benefit from changes to SGC
A common instance where this occurs are medical practitioners who have their own practices but also undertake employment with hospitals. The hospital is required to withhold 9.5% superannuation on wages paid even though the practitioner may be earning in excess of $263,156 of wages in their own practice resulting in the medical practitioner having excessive superannuation contributions in a financial year.
The new legislation proposes to allow an employees to apply to the Commissioner for an employer shortfall exemption certificate. This certificate will allow employers to pay less than the 9.5% contribution limit in relation to that employee without incurring a Superannuation Guarantee Shortfall.
The only conditions to being issued a certificate is that the employee must be the one who applies for the exemption and that the employee will be likely to have excess concessional contributions.
The legislation is proposed to start from 1 July 2018 but is likely to only have practical effect from 1 July 2019 given superannuation payments for year ended 30 June 2019 will have been already made.
Should you be in a position to take advantage of this change in legislation and you would like to discuss it further, please do not hesitate to contact our resident Tax Specialists Ian McGinniss or feel free to speak with anyone from our Walsh Health Division.