Average Earners Hurt By Loophole That Allows Employers To Pocket Benefits Of Salary Sacrifice Super

Posted: Tuesday 06 December, 2016

New analysis of ATO data reveals nearly two thirds of those affected by a loophole that allows employers to effectively pocket some or all of benefits of employees' additional sacrifice super contributions are earning under $80,000 per year.

The analysis undertaken by Industry Super Australia follows revelations yesterday that an estimated 2.4 million Australians are not being paid their legal super entitlements.

David Whiteley, Chief Executive of Industry Super Australia said the legal loophole delivered a billion dollar hit to the retirement savings 360,000 Australians on top of the $3.6 billion in unpaid super under the strictest legal definition revealed yesterday.

"61 percent of those affected have incomes under $80,000 and only 6 percent affected have incomes that place them in the top tax bracket over $180,000. The average loss for a middle earner is $2,900.

Taxable Income

Persons who salary  sacrifice but employer has reduced Super Guarantee Contribution

Cumulative percentage

Average Amount Underpaid

Below $18,200




$18,201 - $37,000




$37,001 - $80,000




$80,001 - $180,000




$180,001 - $300,000




$300,001 and over









Source: ISA analysis of ATO two percent sample file

“Salary sacrificing additional super contributions is an important way to boost final retirement savings – but it will only help if it is on top of the compulsory 9.5% paid by employers.

“While there is a legal loophole there for employers to reduce their contributions it is not what common sense and fairness would dictate.

"Reliance by some employers on this loophole significantly undercuts efforts by their employees to increase their retirement savings.

“Until the loophole is closed employees should check the arrangements applying to them and seek agreement with employers to maintain their 9.5% minimum employer contributions on their full pay, on top of any salary sacrificed amount.

“Closing the loophole must be a priority for Government along with requiring super contributions are paid at least monthly rather than quarterly.

For further information, please contact Phil Davey 0414 867 188