Budget SG change helps board directors

Superannuation fund and public company directors who receive fees from multiple sources may be amongst those best placed to take advantage of the Government’s Budget changes allowing individuals to apply to the Australian Taxation Office (ATO) for an exemption from the superannuation guarantee (SG).

That is the assessment of KPMG Superannuation and Advisory partner, Adam Gee, together with KPMG’s director, employment taxes, James Trainor who have pointed to the manner in which directors who sit on multiple boards may currently receive superannuation contributions which in aggregate exceed their concessional contributions cap.

They said this occurred because each company paying directors’ fees was required to comply with their SG obligations, without regard to superannuation contributions being paid by any other company.

Gee and Trainor noted that when an individual received employer superannuation contributions in excess of their concessional contribution cap ($25,000 per annum), the excess amount was included in their assessable income, with a non-refundable tax offset for the 15 per cent tax paid by the superannuation fund.       

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“In addition, an excess concessional contributions charge applies to any additional tax liability related to the excess concessional contribution,” they said. “Even more unpleasant, excess contributions which are not withdrawn from the superannuation fund count towards the individual’s non-concessional contributions cap ($100,000 per annum) and non-concessional contributions exceeding that cap are taxed at a rate of 47 per cent.”

Gee and Trainor said that, for directors, this had complicated their financial affairs and potentially resulted in additional tax, but these people would now be able to utilise the May Budget changes relating to the SG exemption. 

They said that subject to the proposal becoming law, application could be made by individuals with more than one employer, who expected their income for SG purposes to exceed $263,157 for the financial year.

The application would need to be made annually, and at least 60 days before the start of the quarter to which the exemption would apply to. As well, the individual would need to nominate which employer the exemption certificate applied to and, if approved, the ATO would send the exemption certificate to the individual and the employer.

The KPMG analysis noted that, once issued, the exemption certificate could not be varied or revoked, but the employer could choose to ignore the exemption.