Time running out for employers to take action
19 June 2008
Plum has taken the proactive step of contacting all its corporate clients in relation to
the standardisation of the Superannuation Guarantee (SG) Earnings Base to
Ordinary Time Earnings (OTE), due to take effect from 1 July 2008.
According to Managing Director Mike Fitzsimons Plum recognised early in 2007 the
potentially labour intensive impact these legislative changes could have on corporate
clients, and yet there was little industry or media coverage highlighting the change.
'There are so many circumstances where our corporate clients may have to adjust
their current earnings base arrangements to ensure that they align to the new OTE
definition. With very little coverage of these changes, we recognised that many of
our corporate clients might not fully understand or appreciate the implications of the
change,' Mr Fitzsimons said.
'If our corporate clients are not across all the implications of the change, their
employees might be shortchanged on their superannuation contributions and a
penalty could be imposed on the sponsoring employer.'
Some of the potential impacts on employers include:
- Payroll systems
- HR policies
- Remuneration and Benefit policies
- Finance budgets and corporate communications may need to be updated to
cater for extra SG obligations
'In addition, employees could also be impacted by the change, and potentially could
see a change in their SG contribution post 1 July 2008, and take home pay.
According to Mr Fitzsimons, while potentially getting an increase in their
superannuation contributions sounds great, employees also needed to be aware that
this could increase their amount of concessional contributions and potentially put
them over the concessional contributions cap (Cap).
'The tax implications of an employee going over this Cap can be significant - for
members on the highest marginal tax rate it could result in an effective tax rate of
93% on their super. Already our corporate clients have had a number of instances
where an employee's annual bonus put them close to exceeding this Cap,' Mr
Fitzsimons said.
'At Plum we already have a strategy in place to notify individuals when they reach
80% of the Cap limit, so these individuals are able to review their super contributions
strategy for the remainder of the year.
'As a result of our strategy, our members are able to minimise their tax obligations if
they so wish and our clients are prepared and able to meet their SG obligations.'
Plum's strategy involved putting together guiding principles around the SG changes
and communicating these to corporate clients. Plum's Relationship Managers then
followed up with one-on-one meetings, seminars and presentations, confirming the
clients understood the changes and their preferred approach.
'This comprehensive strategy is just one of the many reasons Plum's corporate
clients have confidence in our employer services approach and comprehensive
communications program,' Mr Fitzsimons said.
'We believe that meeting our obligations as a superannuation administrator is not just
about sending out those communications we are legally obliged to do so, but going
the extra step and actively assisting our corporate clients to understand these issues
in order to ensure they meet their superannuation obligations.'
 Read the full version of this story - Time running out for employers to take action on Ordinary Time Earnings (PDF 33kB).
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