Recording Australian Salary with Super and salary sacrifice

prl prl at ozemail.com.au
Sat Dec 29 22:51:07 EST 2012


Hi, Chris.

I was in a defined benefit superannuation scheme where the employer 
contributions were implicit and didn't appear on my pay slip. Do 
employer Superannuation Levy contributions appear in your net pay? I 
wouldn't have thought so.

Also, you may be over-complicating things for yourself by treating your 
superannuation contributions as an investment (yes, I know they are, but 
bear with me). The value of your superannuation account is not equal to 
your contributions. If the contributions you are making (your salary 
sacrifice, and I think, the employer contributions) are from before-tax 
income, then they are taxed at 15% on entry into the superannuation 
fund. There are also normally administration charges on the 
superannuation account. And, of course, the big complication is that the 
intention is for the net value of the superannuation to grow to be 
larger than your total contributions less tax and admin fees. This could 
be reflected as earnings payments into the superannuation fund (another 
income stream), for dollar-based funds, or as changes in the unit value 
of the units you have bought (for a unit-based fund).

So if you want to track your actual net worth including superannuation, 
then you need to do quite a bit of work to keep the account up-to-date.

In the last few years before I retired, I made salary sacrifice 
contributions into a superannuation fund (on top of my contributions 
into my employer-run superannuation). I just treated these as expenses - 
and the value of the superannuation didn't appear in my net worth (which 
is wrong, of course, but simpler to manage). That didn't mean that I 
didn't keep a watch on my superannuation account, but I did it with 
other means. The salary sacrifice superannuation just didn't appear as 
an asset in GnuCash.

Keeping track of the value of the defined benefit scheme asset was even 
more of a problem, because its value was an increasing multiplier on my 
average annual gross salary over the past three years. Again, I simply 
treated it as an expense.

It would also seem useful to track your PAYG tax contributions.

So, assuming that your employer contributions don't appear as part of 
your net pay, and you account for your PAYG tax contributions, then I'd 
suggest two transactions, a split one from Income:Salary and a simple 
transaction from Income:Superannuation:Employer Contribution something like:

Transaction 1:
"Gross Pay" - Income:Salary - Withdraw - $1000
"Income Tax" - Expense:Income Tax - Deposit - $300 (30% effective tax 
rate - made up)
"Salary Sacrifice" - Expense:Retirement (or Asset:Investment:Retirement) 
- Deposit - $20
"Net pay" - Asset:Checking Account - $680

Transaction 2:
"Employer super contribution" - Income:Superannuation:Employer 
Contribution - Withdrawal - $90 (9% of $1000)
"Employer super contribution" - Expense:Retirement (or 
Asset:Investment:Retirement) - Deposit - $90

If the employer contribution is included in your gross pay (which seems 
unlikely, but it could be the case):

Transaction 1:
"Gross Pay" - Income:Salary - Withdraw - $1090
"Employer super contribution" - Expense:Retirement (or 
Investment:Retirement) - Deposit - $90
"Income Tax" - Expense:Income Tax - Deposit - $300 (30% of $1000 
effective tax rate - made up)
"Salary Sacrifice" - Expense:Retirement (or Investment:Retirement) - 
Deposit - $20
"Net pay" - Asset:Checking Account - $680

As Liz pointed out, in each transaction, the amounts must balance. The 
sum of the deposits must equal the sum of the withdrawals. That's 
more-or-less what double-entry accounting is.

Peter

On 30/12/12 10:08, Chris Henderson wrote:
> I'd like to confirm recording Australian Salary with Super (amount
> employer pays into retirement fund; usually 9% of gross salary) and
> salary sacrifice (amount I contribute to Super; comes out of gross
> salary).
>
> Basically, I'd like to keep things simple and don't want to record tax
> if I can do away with it.
>
> Salary gets paid into my checking account.
>
> Open checking account tab, type employer name and click split transaction:
> In the first split: "My Net Pay" : Current Asset:Checking Account:
> Deposit: $1000
> In the second split: "My Salary": Income:Salary: Withdraw: $1000
> In the third split: "My Super": Investment:Retirement: Deposit: $50
> In the fourth split: "My Salary Sacrifice": Investment:Retirement: Deposit: $20
>
> Is this correct?
>
> Thanks.
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