Salary sacrifice and the super calculation¶

Salary sacrifice is an arrangement where an employee agrees to give up part of their salary in return for their employer putting that amount into their super instead. It can be a tax-effective way for an employee to boost their super.

This lesson is only about one thing: how salary sacrifice affects the employer's super guarantee (SG) calculation. There is an important rule here that changed in 2020, and getting it wrong short-changes the employee's super.

In one line

Since 1 January 2020, salary-sacrificed super cannot reduce the earnings base an employer pays super guarantee on — SG is worked out on the employee's OTE before any sacrifice.

Why this matters¶

Before the rule changed, some employees ended up with less employer super than they should have, because their own sacrifice was quietly lowering the amount the employer had to pay. The current rule protects the employee's super. Applying it correctly keeps the employer compliant and the employee's super whole.

What you will learn¶

How salary sacrifice affects the super guarantee earnings base
What changed from 1 January 2020
How to work out SG on the correct base when an employee sacrifices to super

Understanding the concept¶

Employer super guarantee is worked out on an earnings base — the employee's ordinary time earnings (OTE).

The ATO explains that from 1 January 2020, salary-sacrificed super cannot reduce that earnings base. Two things follow from this:

The employer must work out SG on the employee's OTE before any salary sacrifice — you use the full OTE, not the reduced amount after the sacrifice comes out.
The amounts an employee sacrifices to super cannot count towards the SG the employer is required to pay. The sacrifice is on top of the employer's SG, not part of it.

In plain terms: the employee's decision to sacrifice some pay into super does not lower the employer's own super obligation, and it does not do the employer's job for them.

Before 1 January 2020, an effective salary sacrifice arrangement could reduce OTE, which could reduce the SG the employer had to pay. That is no longer the case.

For accountants & bookkeepers

The current earnings base is the OTE base — the employee's OTE plus any OTE amounts they sacrifice in return for super. SG is a percentage of that base, and sacrificed contributions are not creditable against it. Under Payday Super, the same principle carries through: salary-sacrificed amounts are part of qualifying earnings, so they are included in the base rather than deducted from it. This lesson focuses on the calculation base only — the Contributions module covers salary sacrifice more broadly.

Example¶

Jordan earns OTE of a set amount each pay and asks the employer to salary sacrifice a slice of it into super.

The employer works out SG on Jordan's full OTE — the amount before the sacrifice — and pays that as the employer contribution. On top of that, the employer also puts the sacrificed slice into Jordan's super, because that slice is Jordan's own arrangement, not part of the employer's SG. The sacrifice does not shrink the base and does not reduce what the employer has to pay.

Common mistakes¶

Working SG out on the reduced salary after the sacrifice, instead of on full OTE.
Counting the employee's sacrificed amount as part of the employer's SG.
Assuming the pre-2020 treatment still applies — it does not.

How this works in myaccountant¶

In the app — when an employee has a salary sacrifice to super, myaccountant works the employer's super out against the correct SG base, using OTE before the sacrifice. The sacrificed amount is handled as the employee's own contribution and is not treated as part of the employer's super guarantee.

Key points¶

SG is worked out on an earnings base — the employee's OTE.
Since 1 January 2020, salary sacrifice cannot reduce that base.
Work SG out on OTE before any salary sacrifice.
Sacrificed amounts cannot count towards the employer's SG.
The pre-2020 treatment, where sacrifice could lower OTE, no longer applies.
The Contributions module covers salary sacrifice more broadly.

Learn next¶

General information only — not tax, super or financial advice.

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