When is an employer exempt from making superannuation contributions?

In 2024, all employees will be able to bring legal action against their employer if the employer fails to meet its superannuation guarantee contributions (the current rate is 11% of an employee’s ordinary time earnings). Previously, this right was only available for employees covered by an award or enterprise agreement that contained the obligation on employers.

Since 1 January 2024, the National Employment Standards (NES) in the Fair Work Act 2009 (Cth) (FW Act) give employees an entitlement to superannuation consistent with superannuation guarantee laws. Therefore, where an employer complies with superannuation guarantee laws, it will also meet its obligations under the NES.

Employees can take court action under the FW Act to recover unpaid superannuation (unless the ATO has already commenced proceedings for the contributions of concern). This means that any non-compliance with superannuation obligations exposes employers, and their directors, to large financial penalties and/or imprisonment, as well as reputational damage.

However, an employer will not be exposed to risks associated with failing to make compulsory superannuation contributions if their employee has produced a superannuation guarantee employer shortfall exemption certificate.

The exemption applies to high-income earners with multiple employers. The exemption releases one or more of an employee’s employers from their superannuation guarantee obligations for up to four quarters in one financial year. However, an employee issued with an exemption certificate is still required to have at least one employer make superannuation contributions on their behalf.

To be eligible for the superannuation guarantee employer shortfall exemption certificate, an employee must:

• have more than one employer; and
• expect their mandated concessional superannuation contributions to exceed the concessional contributions cap for the financial year (currently, $27,500).

Employers are within their rights to disregard an employee’s superannuation guarantee employer shortfall exemption certificate and continue to make contributions on their behalf.