salary sacrifice
The Government moves to counter extreme use of salary sacrifice to avoid tax.
The government is to introduce legislation to minimise the use of excessive 'salary sacrifice' as a means of paying less tax,
This legislation is to target high-income employees who 'sacrifice' their salary level in order to reduce their income tax. This is by arranging a dramatic reduction in salary in return for a proportionate increase in employer superannuation contributions, which are taxed at a rate lower than their salary.
Dr Cullen is quoted as saying "That is a misuse of the tax rules on employer superannuation contributions that results in great unfairness to other taxpayers on similar incomes. In the extreme, those who take advantage of salary sacrifice may well pay thousands of dollars less in tax than others on the same income.”
Dr Cullen says that if the practice is not stopped it has the potential to create a revenue loss of between $90 million and $120 million a year. He goes on to say
"The changes we are announcing will mean that most employees are taxed at about the right marginal rate on their employer superannuation contributions. The top rate of tax on employer superannuation contributions will remain at 33 per cent, but employees on lower salaries will pay only 15 or 21 per cent, depending on their overall income.”
Rates will be based on the total of an employee's salary or wages and employer superannuation contributions, and the accompanying thresholds for tax on employer contributions will be adjusted. The adjustments will result in the thresholds being 15 per cent higher than personal income tax thresholds to reduce the possibility of over-taxation. The complexity of the legislation will be reduced by removing two of the options for assessing tax on employer superannuation contributions that are not being used.
The changes, which were set out in an issues paper released earlier this year, will be included in the taxation bill scheduled for introduction in May.
Printer Friendly Page 
