On 19 September the Treasury Laws Amendment (2018 Superannuation Measures No. 1) Bill 2019 was passed by the senate. The Bill included a long overdue measure to allow certain people to opt-out of receiving the Superannuation Guarantee (SG) contribution from their employer from 1 January 2020. The need for this Bill has become more necessary in recent years as the annual concessional contribution cap has reduced to $25,000.

The Bill addresses the problem where high income earners who have multiple employers exceed the concessional contribution cap because the total of their SG is over the $25,000 cap. For example, an employee earns $200,000 per annum from two employers, totalling $400,000. They each pay the 9.5% SG contribution of $19,000 which combined is $38,000 and above the $25,000 cap.

To avoid this from happening, the employee is able to apply to the ATO for an Employer Shortfall Exemption Certificate which is passed onto a single employer and allows that employer to forgo the SG payment for any quarter or for multiple quarters in a financial year – it does not go on indefinitely. The application must be lodged with the approved form at least 60 days before the first day of the first quarter that the application relates to.


The opt-out does not apply to employees with a single employer as existing legislation is in place to prevent an excess contribution from occurring. An employer of a high income earner is legally only required to contribute the 9.5% SG up to Maximum Contribution Base.

For example, during the 2019 financial year the Maximum Contribution Base is $55,270 per quarter or $221,080 per annum. The 9.5% SG contribution on $221,080 is $21,003, which is below the cap of $25,000 and therefore no excess is incurred. If an employee earns $221,080 or above, the employer is only legally required to contribute $21,003 as the SG.

Unfortunately, high income employees with a single employer still exceed the $25,000 as the Maximum Contribution Base was not followed. The employee is able to negotiate with their employer to receive any excess SG over the Maximum Contribution Base as salary rather than superannuation.


When an employee applies to the ATO for the Employer Shortfall Exemption Certificate, the ATO will take the following into account:

  • Consider whether it is likely the employee will exceed the concessional cap if the certificate is not issued,
  • Ensure at least one employer will be required to pay the SG contribution, and
  • Consider if it is appropriate to issue the certificate based on other factors the ATO may consider.


The main advantage is to avoid the administrative hassle of exceeding the concessional contribution cap. However, it could be argued that applying for the exemption on an annual or even quarterly basis could also be considered an administrative hassle.

If the exemption is allowed, the employee and employer should negotiate additional wages in lieu of the superannuation contributions. If this agreement is not reached, the exemption should not be provided to the employer. This will generate an excess contribution however due to the excess contribution refund process, the employee will still be better off than not receiving either the superannuation contribution or wages in lieu.  Additionally, further entitlements that could be linked to salary may reduce as a result of opting out of SG which should be considered.


If you would like to this discuss further please contact your Bell Potter adviser.

Authored by Jeremy Tyzack – Head of Technical Financial Advice at Bell Potter Securities, October 2019
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