What is salary sacrificing into super?
Salary sacrificing into super is an agreement between you and your employer to pay some of your pre-tax salary as contributions into super. Doing this can also be tax effective. The amount you contribute to super is taxed at up to 15% (and up to 30% if your income is over $250,000 per annum) rather than your marginal tax rate, which might be up to 47%. Salary sacrificed amounts to super are concessional contributions.
How does it work?
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Start by talking to your employer about your options to set up a salary sacrifice arrangement and how much you’d like to deduct from your pay. And, to understand if it will impact any other employment entitlements such as termination payments, bonuses and other benefits.
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If it is right for you, you’ll need to complete a salary sacrifice form and give it to your employer so that they can set up the contributions from your before-tax pay into your super. Alternatively, your employer may have their own process.
What are the benefits?
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Your additional contributions happen automatically and by paying less tax, you can have peace of mind knowing that your money is working harder for your future.
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The power of compound interest and your additional contributions can grow your super significantly quicker over time as interest earns interest on itself.
Is salary sacrifice right for me?
It could be, but first check that you’re eligible to contribute to super and that:
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Salary sacrifice will reduce your take home pay so consider whether it will fit with your personal circumstances and financial commitments. Depending on your level of income, it can be a very tax-effective way to contribute more to your super. Try using the MoneySmart Super contributions optimiser to see how salary sacrifice can work for you.
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Salary sacrifice contributions count towards the concessional contributions cap and tax penalties may apply if the cap is exceeded.
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There is no benefit in salary sacrifice over voluntary after-tax contributions if you do not pay tax (generally if your taxable income is less than $21,884 pa).
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And remember, you can’t access your super until you meet a condition of release such as reaching your preservation age and retiring.
See if your retirement planning is on track and explore things you can do if it’s not.
We’re here to help
If you value the experience of experts in other aspects of your life, don’t discount it when it comes to your financial wellbeing, including your super.
A financial adviser can help you identify ways to grow your super. So, start the conversation to see how we can help you, call us on (03) 9436 6999.
Important information
The information on this web page is of general nature only and has been prepared on behalf of the Trustee without taking into account your objectives, financial circumstances or needs. Before acting on any of this information, you should consider whether it is appropriate to your objectives, financial circumstances and needs, and seek appropriate professional advice. You should not rely on this information to determine your personal tax obligations, please consult a registered tax agent for this purpose.
