Reportable Employer Super Contributions (RESC) and the late-career income test impact

For Australian late-career employees using salary sacrifice to push part of their pre-tax salary into superannuation, the resulting contributions create a category called Reportable Employer Super Contributions (RESC) that appears on the employee's income statement and flows through to their Adjusted Taxable Income (ATI) for income-test purposes. RESC is the portion of employer super contributions beyond the mandated Superannuation Guarantee — broadly, the contributions the employee can reasonably influence through salary sacrifice or individually-negotiated arrangements. The income-test consequence is substantial and often missed: salary sacrifice reduces the employee's taxable income at marginal rates (the immediate tax saving), but the same sacrificed amount is added back through ATI for tests including the Commonwealth Seniors Health Card (CSHC), SAPTO, the private health insurance rebate, the Medicare Levy Surcharge and others. For late-career employees planning the transition into retirement-phase benefits, aggressive salary sacrifice in the final pre-retirement years can produce a meaningful tax saving while quietly denying access to benefits that would otherwise be available in early retirement.

The RESC definition captures employer contributions beyond the mandated Super Guarantee that the employee influenced. The standard case is salary sacrifice: the employee tells the employer to direct part of pre-tax salary into super, reducing the cash salary and increasing the super contribution; the sacrificed amount is RESC. Voluntary employer contributions beyond the SG — typically negotiated through individual salary packaging — are also RESC. What is not RESC includes the mandated SG (12% for FY25-26), personal contributions claimed as a tax deduction by the employee (these are added separately to ATI), and government co-contributions. The employer reports RESC on the income statement as a separate line, distinct from gross salary and tax withheld.

The flow into ATI is the consequential mechanism. ATI is a composite income measure used by Centrelink, the ATO (for some offsets) and other agencies to assess income for benefit and concession purposes. It combines taxable income, reportable fringe benefits, RESC, personal deductible super contributions, total net investment losses (negative gearing), tax-free pensions and benefits, and target foreign income, less deductible child maintenance. The key feature for our purposes is that while salary sacrifice reduces taxable income by the sacrificed amount, the same amount is added back through RESC — so ATI captures the pre-sacrifice economic income. The policy intent is obvious: income tests are designed to look at the individual's real economic capacity, and salary sacrifice is essentially a deferral of consumption rather than a reduction in capacity. ATI removes the salary-sacrifice "lens".

The income tests affected are where this lands for retirees. The most consequential is the CSHC — for FY25-26 the income limits are $101,105 a year for a single and $161,768 combined for a couple. Importantly, the CSHC income test is not ATI alone — it is ATI plus deemed income from account-based pensions (deemed when the holder is 60 or over, at the deeming rates that apply from 20 March 2026: 1.25% on the first $64,200 of financial assets for a single, $106,200 combined for a couple, and 3.25% above). So a retiree with a low taxable income (drawing tax-free pension income, no salary) but with significant prior-year RESC and a large ABP balance can find both halves combine to push them over the CSHC limit. SAPTO uses similar ATI-based rebate-income thresholds for low-income seniors. The private health insurance rebate and the Medicare Levy Surcharge use income tiers based on income for surcharge purposes that includes RESC. Each test has its own thresholds, but they share the same trick: RESC inflates them all.

The late-career planning tension is the practical issue. An employee on a 37% marginal rate considering a $30,000 salary sacrifice into super faces a clear trade-off: the immediate tax saving is around $5,500 to $6,000 (the gap between the 37% marginal rate and the 15% contributions tax in super, plus Medicare), but the same $30,000 is added to ATI for income-test purposes. For an employee whose ATI sits well below all relevant thresholds, the income-test impact is irrelevant — pure tax saving. For one whose ATI is near the CSHC threshold, the $30,000 may push them over and cost the card in retirement. CSHC's lifetime value runs into the tens of thousands of dollars in PBS prescriptions and concessions, so the trade-off can favour pulling back on the sacrifice in close-to-threshold cases. The right answer depends on the marginal rate, the ATI projection and the value of the affected benefits.

The CSHC application timing problem is the most common practical manifestation. CSHC eligibility is generally assessed against the reference tax year — usually the most recent completed year. For a retiree who applies shortly after retirement — say, in late 2026 having retired in June 2026 — the reference year is 2025-26, the final working year, which carries a full year of salary plus a full year of RESC. Even if the retiree's current income is well below threshold, the reference-year figures will often deny the card. The remedy is one many retirees and even some advisers don't know about: where the income for the reference year is above the limit and the applicant can show a change in circumstances (retirement and the loss of employment income is precisely such a change), Services Australia will accept a current-year income estimate instead of the reference-year tax return. A genuinely retired applicant whose income has dropped can usually get the card straight away on that estimate, without waiting 12-18 months for the clean post-retirement return. The timing trap is real, but it is navigable.

The personal deductible contributions interaction can stack with RESC to amplify the ATI impact. Where a late-career employee both salary-sacrifices into super (RESC) and makes personal contributions claimed as deductions (added separately to ATI), the cumulative effect is meaningful. An employee on a $130,000 salary who salary-sacrifices $20,000 and makes a $15,000 personal deductible contribution has a taxable income of roughly $95,000 but an ATI of roughly $130,000 — the full $35,000 of contributions reduces taxable income but is added back through ATI. For late-career employees aggressively using their concessional cap (including carry-forward unused cap from prior years where the total super balance is under $500,000), the combined effect on retirement-phase income tests should be modelled explicitly.

The strategic responses centre on timing and contribution structure. Salary sacrifice deployed earlier in the career builds super effectively without affecting near-retirement ATI calculations — the RESC is in years that don't matter for the post-retirement tests. Sacrifice in the final pre-retirement years has the worst ATI consequences and should be approached deliberately. End-of-FY retirement timing (retiring on 30 June) confines RESC to a single financial year, with the following year having zero RESC. Non-concessional contributions are an alternative where the TSB is below the $2.0M general transfer balance cap — an NCC is not added back to ATI, so it builds super without affecting income tests; the trade-off is the loss of the immediate tax deduction. And where RESC is already in the recent tax history, applying for CSHC with a current-year estimate post-retirement is the simplest defensive move.

What do worked planning examples show?

These two cases show how RESC affects late-career income tests. Illustrative only — not personal advice — using FY25-26 figures.

Case 1 — Mark, 67, senior manager earning $175,000. He has salary-sacrificed $25,000 a year into super for the past eight years, including the current year. He plans to retire on 30 June 2026. On these facts, Mark's 2025-26 return will show taxable income around $150,000 (salary minus the sacrifice), RESC of $25,000, and an ATI around $175,000 — well above the single CSHC threshold of $101,105. His 2026-27 return, his first full year of retirement, will show taxable income close to nil (the super pension is tax-free at 60+ from a taxed fund), RESC of zero and ATI close to nil. But Mark holds a substantial account-based pension — say $1.5M — and the CSHC test is ATI plus deemed income on his ABP balance: at the 1.25%/3.25% deeming rates from 20 March 2026, that adds about $46,000 a year. So his post-retirement CSHC income would be roughly $46,000 — still comfortably under $101,105. On these facts the rational approach is to apply for CSHC straight after retirement using a current-year income estimate: the reference-year (2025-26) return shows an inflated $175,000 ATI, but his actual current income on retirement is the ABP deeming plus negligible ATI, well under the limit. With the change-in-circumstances estimate, the card can typically be granted without waiting for the 2026-27 tax return to be lodged.

Case 2 — Catherine, 58, an accountant earning $130,000 who hasn't been salary-sacrificing much, with a total super balance of $380,000. She is considering using carry-forward concessional cap to make $80,000 of personal deductible contributions in 2025-26. On these facts, the $80,000 deduction would bring her taxable income to around $50,000 (a tax saving of roughly $14,000 against her marginal rates), but the same $80,000 is added back to ATI as personal deductible contributions, keeping her ATI around $130,000. With seven years until Age Pension age at 67 — and CSHC eligibility tied to that age — the one-year ATI spike from the catch-up contribution doesn't actually affect any test she'll be claiming on imminently, so the aggressive catch-up is largely a clean tax win in her circumstances. On these facts the rational steps are to model the immediate tax saving against any benefits that do depend on FY25-26 ATI (private health insurance rebate, Medicare Levy Surcharge tiering), confirm the carry-forward eligibility (her $380k TSB is under the $500,000 threshold), and proceed if the trade-off remains favourable. The general point is the same — the model needs to look at both the tax effect and the ATI effect.

For late-career employees with salary-sacrifice arrangements, RESC is one of those silent income-test factors that's easy to overlook in the satisfaction of the immediate tax saving. The advice work is to map the client's contribution pattern each year, project ATI (and CSHC income, including deemed ABP income) for the current year and the year after retirement, compare with the thresholds for the tests that matter, recommend timing adjustments where appropriate (earlier-career deployment, end-of-FY retirement, NCC alternative for clients with cap room), and coordinate the CSHC application with the current-year-estimate remedy where the reference-year RESC would otherwise be a problem. Done well, salary sacrifice produces both the tax saving during working years and clean access to retirement-phase benefits; done without the income-test lens, the tax saving can be partly undone by lost benefits the retiree could have had.

Sources

• Services Australia — Income test for commonwealth seniors health card
• Australian Taxation Office (ATO) — Income tests
• Australian Taxation Office (ATO) — Reportable employer super contributions
• Australian Taxation Office (ATO) — Contributions caps
• Australian Taxation Office (ATO) — Private health insurance rebate