Building your super balance
Boost your super and potentially manage your tax at the same time.
What are salary sacrifice contributions?
Salary sacrifice is an arrangement with your employer to take some of your pre-tax salary or wages and contribute directly into your super fund.
Why should I salary sacrifice?
If you salary sacrifice to super, you could reduce your income tax and boost your super balance at the same time.
The key advantage of salary sacrificing is that you’ll be taxed at a maximum rate of just 15%1 (or 30% if you’re also subject to the additional 15% tax) on salary sacrifice contributions and not at your marginal tax rate, which could be up to 47% including Medicare Levy. In addition, investment earnings on these contributions are taxed at a maximum rate of 15% once they’re invested in your super fund.
The table below gives an indication of what the Association of Superannuation Funds of Australia (ASFA) suggests you currently need at retirement to enjoy a comfortable lifestyle. Salary sacrificing is a great way to reach these goals faster and more effectively.
1You should consider whether the salary amount sacrificed will attract an additional 15% tax - broadly, this occurs when you have an income and concessional super contributions of more than $250,000 in the 2017/18 financial year.
What contribution caps apply to salary sacrifice contributions?
As salary sacrifice contributions are treated as concessional contributions, the concessional contributions cap applies to those contributions. Since 1 July 2017, the cap is $25,000 for everyone. Penalties can apply if you exceed the cap. Further information on concessional contributions cap is available by visiting the ATO website.
The information on this web page is of a general nature only and has been prepared by 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.
1You should consider whether the salary amount sacrificed will attract an additional 15% tax - broadly, this occurs when you have an income plus concessional super contributions of more than $250,000 in the 2017/18 financial year. See ATO website.