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The Guide to Superannuation for Overseas Workers in Australia

Global mobility has a few core challenges for HR departments sending employees on foreign assignment, such as structuring compensation and benefits abroad.  If you are assigning employees to Australia, and trying to understand how to integrate payment of superannuation benefits with salary sacrifice, then you are not alone, and we have some guidance to offer you.

What is Superannuation?

Superannuation (or ‘super’) is simply money paid to workers for retirement in a super fund.  In Australia, if you pay an employee more than AU$450 per month pre-tax, then you must also pay super on top of their wages.  This is true for both Australian residents and expats on work assignment, and cannot be avoided.

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How Much Superannuation Should You Pay Your Overseas Worker in Australia?

The minimum amount of super that you must pay your employee is 9.5% of their wages.  It has to be paid at least four times a year (quarterly).  This is known as the ‘super guarantee’.  This amount is in addition to their salary, and cannot be deducted from compensation, but there are ways the employer contribution could be offset through employee salary sacrifice.

Salary Sacrificing Superannuation

The question may come up of how super payments and salary sacrifice can be used together for employees assigned in Australia.

What is Salary Sacrifice?

Salary sacrifice is where the employee voluntarily allocates some portion of their salary to be paid into their super fund.  Some of your employees might want to do this if they don’t need their entire salary and want to increase their retirement fund.  This amount is still considered an employer super contribution even though it comes from the employee’s salary, and may reduce the amount of the employer super guarantee payment.

Contribution Caps

There are some limits on the amounts that can be contributed through salary sacrifice, since the tax rate of 15% on super contributions is much less than regular income tax.  In 2017, the annual contribution cap for super is $30,000 for employees under 50 years of age, and $35,000 for those over the age of 50.  If the employee exceeds the cap, there may be extra taxes due.

Many companies elect to handle foreign payroll and employment on their own, but there is an option to make this process easier by using a GEO local employer of record.  These are the kind of details that Shield GEO handles for our clients, and we are in a position to make sure that you and your employees are in full compliance with Australian payroll, benefits and tax rules.

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