New Super Rules in Relation to Commission Payments

By Jason Fittler

As of the first of July this year the government made some changes in regards to the 9% compulsory superannuation. Employers now have to pay super on commissions, this will mainly affect people employed in the sales area such as real estate, motor vehicles, advertising.  If you receive commissions as part of your income read on.

First, the new rule means that employers now have to pay you 9% of your commissions. For industries that have an employee base mainly paid through commissions this has added a large increase to their ongoing cost. In effect this has increased their expenses by 9%.
Keep in mind that this comes at a time when we are seeing falling sales in areas such as retail, housing and motor vehicles. As such many employers have looked to review how employees earn their commissions instead of wearing these costs.

So for many of you on commissions you may have already experienced this or will be about to.

Change to your commission structure.

Your commissions will now be inclusive of super. The good news is as follows;
1.    You will receive more money.
2.    Pay less tax.
3.    Have more money in retirement.

Bad news
1.    You will have less in your take home pay.

Let’s look at an example.

The old:-
You earn $50,000 per year in commissions. After tax your take home pay is $40,150 per annum or $772 per week. Total tax paid $9850. No payment to super.

The new:-
You earn $50,000 per year in commissions. You receive $45, 870 as income and $4130 goes towards your super. After tax your take home pay is $37,436 per annum or $720 per week. In your hand you lose $52 per week. The amount of $4,130 is paid into your super fund. You pay tax on these funds of 15% in super so net to your super fund is $3510.  Therefore the total amount you receive after tax is $40,946 which is $796 better per annum or an increase in your pay of $15 per week after tax. Total tax you pay is reducing from $9850 per annum to $9054.

So is your glass half full or half empty?  Overall this is a good result.