Recently, we have seen a growing tendency for employers to become focused on an individual's concessional contribution position when designing remuneration arrangements.
This approach can add unnecessary complexity and blur the line between employer obligations and personal financial planning. In short, managing the concessional contributions cap is the individual’s responsibility, not the employer’s.
Understanding the Concessional Contributions Cap
The concessional contributions cap limits the amount of pre-tax contributions that can be made each financial year before additional tax consequences apply, covering SG contributions, salary sacrifice, and certain employer contributions. Critically, the cap applies to the individual taxpayer across all employers and all funds, meaning employers typically have no visibility of an employee’s complete contribution position. Where an employee has multiple employers, carry-forward entitlements, or personal deductible contributions, the employer simply cannot accurately determine whether the cap will be exceeded.
Why Employers Should Avoid Taking Responsibility
The concessional contributions cap is influenced by a range of personal circumstances, including:
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Employment arrangements across multiple employers
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Personal contribution strategies
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Carry-forward concessional contribution balances
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Changes in employment during the year
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Financial planning and retirement objectives
These are matters that sit squarely within the employee’s personal financial affairs.
Employers should neither monitor an employee’s concessional contribution position nor design remuneration strategies around assumptions about remaining cap space. Beyond the administrative burden and compliance risk, there is a more serious exposure: advising an individual on their superannuation contributions constitutes financial product advice under the Corporations Act 2001. Most employers are not AFSL-licensed to provide it, and even well-intentioned guidance from payroll or HR, such as suggesting an employee adjust their salary sacrifice to stay under the cap can cross that line, creating personal liability for the individuals involved and regulatory risk for the organisation.
The Employer’s Real Area of Focus: the Maximum Contribution Base
Rather than focusing on concessional contribution caps, employers should concentrate on the areas they can directly control and are responsible for under superannuation legislation.
The primary consideration is the Maximum Contribution Base (MCB). The MCB represents the earnings threshold above which employers are not required to pay Superannuation Guarantee contributions. Once an employee’s earnings exceed this threshold, employers have a commercial decision to make:
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Cap superannuation contributions at the MCB, paying only the minimum amount required by legislation; or
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Continue paying superannuation on earnings above the MCB, as part of the organisation’s remuneration philosophy or contractual arrangements.
This is a legitimate employer remuneration decision because it relates directly to the employer’s cost of employment and statutory obligations.
Whether an organisation chooses to cap contributions at the MCB or continue paying superannuation on all earnings should be determined by factors such as:
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Employment contracts
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Enterprise agreements
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Remuneration strategy
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Market competitiveness
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Budget considerations
These decisions are entirely separate from an employee’s concessional contributions cap.
Keeping Responsibilities Clear
A well-designed remuneration framework clearly separates employer obligations from employee financial planning decisions.
Employers are responsible for:
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Meeting Superannuation Guarantee obligations
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Determining whether superannuation is paid beyond the MCB
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Administering salary sacrifice arrangements in accordance with employee instructions
- Ensuring payroll and reporting obligations are met
Employees are responsible for:
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Monitoring their concessional contribution cap
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Understanding the tax implications of additional contributions
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Managing salary sacrifice arrangements in line with their personal circumstances
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Seeking financial advice where appropriate
The Impact of Legislative Change: Payday Super and the MCB
The introduction of Payday Super and the shift of the Maximum Contribution Base from a quarterly to an annualised threshold have prompted a surge in employer queries. In many cases, the difficulty employers are experiencing is not with the legislation itself; it is a consequence of remuneration structures, and in some instances Enterprise Agreements, that were incorrectly built around the concessional contributions cap. Embedding an individual tax concept into an employment framework was always problematic; legislative change has simply made that problem harder to ignore. Organisations that have kept their remuneration design anchored in employer obligations, the Superannuation Guarantee and the MCB will find this transition considerably more straightforward.
The concessional contributions cap is a personal tax matter that belongs to the individual employee, not the employer. It should play no part in salary packaging or remuneration discussions.
Employers who keep their focus on Superannuation Guarantee obligations and the Maximum Superannuation Contribution Base and leave concessional cap management to employees will run simpler, lower-risk remuneration frameworks and be far better placed to navigate legislative change.
This article is intended for general informational purposes only and does not constitute legal, financial, or taxation advice.
