The old saying goes: “You don’t miss what you don’t have.” The same can be said of the salary sacrifice solution. There is no painful deduction from your bank account every month. Instead, this extra super contribution is taken from your pay and put into your super.
While a personal contribution is adding extra to super from your take-home pay, salary sacrifice is a way to top up your super from your before-tax salary without the painful deduction from your bank account every month. Instead, this extra contribution is taken from your pay and put into your super.
Setting up a salary sacrifice scheme with your employer means your salary sacrifice contribution is paid out of your pre-tax salary directly into your super account. This means your taxable income is lowered, and the amounts sacrificed are not subject to pay as you go (PAYG) withholding tax, but instead will be taxed by your super fund1. This is generally lower than most people's personal tax rate which can be as high as 47%2.
Contributions caps apply.
Using a salary sacrifice scheme with your employer means you don’t feel the pinch on your pocket when the money is taken out of your pay.
Please note, salary sacrifice superannuation contributions are classified as employer concessional contributions. These amounts may also count towards your employer’s superannuation guarantee contributions. Some employers may not offer salary sacrifice to employees or may base their SG contributions on the reduced salary after salary sacrifice contributions are made. Before making any decision you should consider concessional contribution limits and seek advice from a licensed financial tax adviser.
Are you considering salary sacrifice or personal contributions?
It is important to understand if salary sacrificing could provide you with tax benefits, or if you’re better off topping up your super via personal contributions.
Our online Super Advisor tool can help you compare the benefits of each option, at no additional cost to you.
Our dedicated licensed Industry Fund Financial Planning ABN 54 007 016 195, AFSL 232514 financial advisers can also help you decide the best way for you to add extra to your super to maximise your benefits.
For more details about contribution caps and types, please read our Member Guide.
It’s easy. Download our Salary Sacrifice brochure and chat with your employer today about setting up a salary sacrifice arrangement.
1 Contributions are generally taxed at a rate of 15%. An additional tax will be payable on superannuation contributions for high income earners with an adjusted taxable income of $250,000 or more.
2 Includes 2% Medicare Levy.