How do reportable employer super contributions (RESC) work?

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Reportable employer super contributions: What are they?
What super contributions are reportable?
What super contributions are not reportable?
Examples of reportable and non-reportable super contributions
How to report super contributions for your employees
Recordkeeping for RESC: What to record and how long to keep it
What government benefits are affected by reportable employer super contributions?

Making super contributions on behalf of your employees can create a lot of paperwork, but there’s an important extra task you mustn’t forget – notifying the ATO of any reportable employer super contributions (RESC).

RESC payments have an impact on your employee’s eligibility for various government benefits and offsets, and unfortunately the onus is on you to let the ATO know about them.

Reportable employer super contributions: What are they?

RESC are any extra super contributions you make to the super fund of one of your employees above the normal legislated requirements.

These contributions must be reported annually to the ATO, but do not include compulsory super payments like your quarterly SG contributions.

Although RESC are not included in your employee’s assessable income and don’t affect the way you calculate their super contributions, they are of considerable interest to the government.

RESC are used by Services Australia and the ATO when they check your employee’s eligibility for several government benefits and child support. The ATO also uses RESC when calculating the Medicare levy surcharge, senior Australians tax offset, spouse super contributions tax offset, super co-contributions, low income super contributions, Division 293 tax, HELP and Student Financial Supplement repayments.

You are required to report RESC to the ATO if the:

Super contributions are more than you are required to pay under super law; an industrial agreement; the super fund’s governing rules; or federal, state or territory law.
Employee has the capacity to influence the amount or way it is contributed.

What super contributions are reportable?

In general, the employer super contributions that are reportable include:

Additional contributions made as part of your employee’s individual salary package
Additional contributions made under a salary sacrifice arrangement
Before-tax amounts paid to your employee’s super fund at their direction, such as directing an annual bonus to be paid as a super contribution
Matching contributions made under an individual agreement.

For more information, read SuperGuide articles:

What super contributions are not reportable?

Super contributions you make for your employees that are generally not reportable include:

SG contributions
Super contributions required by collectively negotiated industrial agreements
Matching contributions made under a collective agreement
Contributions required by the law or the rules of a super fund
Extra contributions your employee is not able to influence (such as an extra contribution made for administrative simplicity or to meet one of your accepted policies)
Contributions from your employee’s after-tax income, as these will not affect their assessable income.

If you make additional SG contributions as a result of a collective agreement or industrial award and they are not specifically negotiated or influenced by your employee, the extra contributions are not reportable.

Need to know: Capacity to influence

If you enter into an agreement to contribute more super for an employee than you are required, your employee is considered to have capacity to influence the amount of contributions made.

In determining this capacity, the ATO looks at factors such as:

Your relationship with the employee
Your employee’s involvement in negotiating the terms of any industrial agreement governing the super contributions
Size of the contributions for your employee relative to the compulsory super contributions you are required to make
Super contribution arrangements in place for other employees
Any non-arm’s length dealings.

The ATO does not consider an employee has the capacity to influence their super contributions just because they vote for a collective agreement or are part of a group negotiating a collective agreement with you.

An employee is considered to have the capacity to influence super contributions in situations where they can directly negotiate (or have an option to directly negotiate) an employer super contribution in excess of the compulsory contributions.

Examples of reportable and non-reportable super contributions

Case study 1: Extra contributions

José is keen to boost his retirement savings and negotiates an individual common law employment contract with his employer when he starts a new job. His employer agrees to pay super contributions into José’s super fund at the rate of 12% of his salary.

José’s employer has no policy regarding the employer contributions it pays for its employees, other than the 10% SG contributions required by super law. The company is willing to negotiate higher rates of super contributions if employees request it.

To comply with the rules on RESCs, José’s employer records the extra 2% super contributions made for him into his super fund as an RESC on his annual payment summary. The 10% SG contributions are not reportable to the ATO.

Source: Adapted from the ATO website

Case study 2: Contributions under industrial agreements without employee influence

Ayumi runs a small business employing ten employees. Under the industrial agreement covering their employment, she must contribute 13% of her employees’ ordinary times earnings (OTE) to a super fund (3% more than the normal SG contribution amount).

Ayumi’s employees can vote on the agreement but they have no influence over the amount of super she contributes for them. In this case, Ayumi does not need to report the additional super contributions.

Source: Adapted from the ATO website

Need to know: Defined benefit fund contributions

Super contributions you make to a defined benefit fund for your employees are generally not reportable as the amount you must contribute for defined benefit members is usually decided by the fund’s actuary, not your employee.

If your employee can choose to make extra contributions to their account from their before-tax income, however, these extra amounts are reportable. The same applies to any extra super contributions made to an accumulation account in the defined benefit fund (or any other super fund), as the employee influences these contributions.

How to report super contributions for your employees

If you make extra super contributions for one of your employees (such as salary sacrifice contributions), you can choose to report these contributions through your normal reporting using the Single Touch Payroll (STP) system or on the employee’s annual payment summary.

By 14 July each year, you must complete an end-of-year STP finalisation detailing all the super and tax information you have reported to the ATO. Under the STP rules, this finalisation means you are exempt from the requirement to provide your employees with annual payment summaries and to lodge a payment summary annual report. (Your employees can now access online the information formerly available on their payment summaries via the ATO using their myGov login.)

For more information, read SuperGuide articles:

If you choose not to report the extra super contribution amounts through STP, you are still required to give payment summaries to your employees and submit a payment summary annual report to the ATO.

RESC must be reported for the income year (1 July to 30 June) in which they were accrued, not the financial year in which they were paid. This can be different to the year in which they are received by the super fund.

Need to know

Super contributions to a complying super fund – whether or not they are RESC – are not fringe benefits and should not be included on your employee’s income statement or payment summary as reportable fringe benefit amounts.

If you make RESC to an employee, you must provide them with a payment summary even if you have not paid them salary or wages.

Recordkeeping for RESC: What to record and how long to keep it

The ATO requires you to keep records of whether or not your employees influenced the super contributions you made on their behalf. To meet this requirement, you will need to keep records of how you calculated:

Your RESC payments
The portion of the total employer contribution influenced by your employee
Your employee’s salary or ordinary time earnings.

You also need to keep records of the relevant salary sacrifice agreements and industrial agreements.

These records must be kept for five years after they are prepared (or after the transactions are completed) and they must be in English.

What government benefits are affected by reportable employer super contributions?

If you make RESC for an employee, the contributions are not included as part of their assessable income, but they are included in the income tests governing eligibility for several government benefits.

The income tests affected by RESC include the Medicare levy surcharge, dependant and senior Australian tax offsets, super co-contributions, deductions for personal super contributions, low-income super contributions, Division 293 tax on super contributions, spouse super contributions tax offset and HELP repayments.

For more information, read SuperGuide articles: