Ben Travers and Andrew Holland look into the Federal Government's proposed solution to the superannuation issue faced by company directors sitting on more than one board.
Company directors who sit on more than one board (or employees who work for more than one employer) may exceed their annual concessional superannuation contributions cap of $25,000 due to the compulsory superannuation contributions that each company or employer is separately required to make based on the individual’s earnings from that company or employer.
These excess contributions can result in additional administration and tax payments for the individual and their superannuation fund. Our experience is that taxpayers would often prefer to avoid the excess contributions arising in the first place, provided that they could receive the equivalent amount in some other form (such as additional director fees or salary).
With a view to achieving this, the Federal Government has introduced legislation into Parliament as part of Treasury Laws Amendment (2018 Superannuation Measures No. 1) Bill 2019.
The quarterly maximum compulsory contribution base of $55,270 applies separately to each directorship or employment. This could cause individuals providing services for more than one entity (particularly prevalent in the case of company directors) to exceed their concessional contributions cap.
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