Salary sacrificing is a pre-tax contribution from your income to your super account, so you will have more money to enjoy in retirement. Your chosen amount will be provided to you before you are paid, reducing your taxable income and giving an immediate tax benefit.
Salary sacrifice reduces your taxable income, so you pay less income tax. Only 15% tax is deducted from your salary sacrifice amount compared to the rate you pay on your income, which can be up to 47% (including the Medicare Levy). You should consider your marginal income tax rate when determining whether salary sacrifice is beneficial for you.
Salary sacrifice is not offered by all employers. Check with your payroll officer or Human Resources department to see if your employer allows you to salary sacrifice.
Tax benefits of salary sacrifice are:
- The amount you salary sacrifice to super is generally taxed at a concessional rate.
- If you earn below $37,000 there may be very limited advantage in a salary sacrifice arrangement, so a Government super co-contribution may be a more effective way to boost your super.
You may contribute up to $100,000 per financial year (provided you have not reached the transfer balance cap). However, to accommodate larger contributions, people under age 65 can bring forward two years of contributions, up to a total of $300,000.
If you require help with understanding what’s best for you, the team at Superannuation Advice Australia can help. Contact us today!