The government is using an incentive based system as part of its overall strategy to encourage superannuation savings. This includes concessional taxation for superannuation including a 15% contribution tax which if compared with the highest marginal rate of 45% is a 30% savings. 15% is also used as a tax rate for earnings in a superannuation environment. The government is also enforcing compulsory superannuation savings for employees via strategies such as compulsory employer contributions into superannuation on behalf of their employees at the rate of 9% of wages or salaries (Statutory Guarantee). In an environment when the government is encouraging investment in superannuation it is not appropriate that employers can choose to deny employee’s salary sacrifice into superannuation. It could be argued that the employer may not wish to participate in a salary sacrifice arrangement because the administration may be problematic however this should not be a sufficient reason for them to reject the employee’s wishes. It is normal practice in environments where salary sacrifice is allowed that the employees pays the (or salary sacrifices the necessary amount) administrative costs avoiding the need of the employee to be concerned about the cost.
The changes in the superannuation environment saw an almost immediate shift in attitude about superannuation. Previously Reasonable Benefits Limits where making many employees cautious about over committing to superannuation and in some instances paying a penalty (marginal tax rate above the Reasonable Benefits Limit) for the statutory contributions into their superannuation fund which they could not avoid if they stayed as an employee. Now many are choosing to increase their salary sacrifice to extreme levels preferring to live on small salaries and draw downs from other non super assets or borrowings. How does the advantages that are possible for one employee which can be significant become beyond the reach of another because the employer chooses to say “no“. In such a regulated environment it is not reasonable to allow market forces between the employer and the employee survive as the protection for the employee. It is true the employee could decide (or threaten) to leave the employer but this may not always be practical. Take for instance a rural environment where opportunities are limited. The government needs to take responsibility for protecting employees from unreasonable employers particularly where there is asymmetrical power position between the employer and employee.