As part of the government's budget measures announced in May 2008 to change the manner in which some income tests are applied and to remove any inconsistencies in the treatment of salaries that are not subject to income tax, legislation has been passed to support these initiatives.
Reportable superannuation contributions include the reportable employer super contribution and the personal deductible contributions. Reportable employer super contributions (RESC) includes amounts contributed by the employer that are under a salary sacrifice arrangement or employer contributions that are over the amount required under the super guarantee law, an industrial agreement, trust deed or governing rules of a super fund and a federal, state or territory law. Personal deductible contributions are basically personal contributions made into a super fund wherein you claim a tax deduction for the contribution.
Reportable super contributions will affect the eligibility of various rebates, tax offsets such as Mature Age Workers Tax Offset, Medicare Levy Surcharge, Spouse Superannuation Contribution Tax Offset, Government Super Co-Contribution, Higher Education Loan Programme, and Pensioner Tax Offset.
Effective from the 1 July 2009, employers are required to report certain superannuation contributions on the employees' payment summaries at the end of the income year. These contributions are known as "Reportable Employer Superannuation Contribution (RESC)".
Part of the definition of a reportable employer super contribution includes an amount under a salary sacrifice arrangement. This captures superannuation contributions that would have been paid as salary or wages to an employee but for the salary sacrifice arrangement.
The other part of the definition provides us with a mechanism to determine whether the contributions are classified as RESC or not. Therefore, employer contributions under the superannuation guarantee law wherein 9% is contributed would not be included in the definition. However, when the employer makes a contribution above the 9% rate but the employee could not influence this decision, then the contribution is not classified as a RESC. On the other hand, if the employee is able to influence the decision of the employer to use a rate that is over the 9% rate required under the SG law, then the amount in excess of the 9% required under superannuation guarantee is classified as a RESC.
In summary, amounts that are most likely to be excluded from the being a RESC, are all employee after tax contributions, contributions required by a Commonwealth, State or Territory law and contributions to a defined benefit fund in accordance with an actuarial calculation.
Amounts that are most likely to be included as RESC include all superannuation contributions under a salary sacrifice arrangement, any contribution where the employee could choose between the pre-tax and post-tax amount of their gross wage and any contribution where the employee could influence the rate of contribution that is required under various laws.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
