It is generally a requirement that employers pay a minimum percentage (as of today, 9.5%) of an employee’s ordinary earnings into a nominated superannuation fund on their behalf. These mandatory contributions are called Superannuation Guarantee (SG) payments, and individuals have an annual cap of $25,000 on these and other pre-tax amounts.
But what happens when an employee works for multiple different employers, and the cumulative total of their SG payments exceeds the $25,000 limit?
As of the 1st January 2020, new laws come into effect that allow eligible high-income earners with multiple employers to opt out of receiving SG from some of their employers by applying for an exemption certificate. This will help them to avoid exceeding their pre-tax contributions cap.
Without this certificate, an employer is obligated to pay the employee’s SG. If they fail to pay this amount – even with the employee’s agreement, but without an exemption certificate – they will be liable for penalties.
Of course, if an employee wants to exempt an employer from paying superannuation on their behalf, a re-negotiation of the employee’s overall remuneration would be expected to ensure the employee is not worse off. This needs to be done before the exemption certificate is acquired; so as always communication between the two parties is vitally important.