What is salary sacrificing and how does it work?
When you “sacrifice” some of your salary, you make an agreement with your employer to pay it straight into your super account, instead of your bank account. This is an amount on top of your employer’s compulsory Superannuation Guarantee payment (9.5% of your salary).
It helps you save money in two ways:
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You pay less tax
Salary in your super account gets taxed at 15% (if you earn less than $250,000) or 30% (if you earn more than $250,000). However, any salary you take home gets taxed at your usual income rate, which can be as high as 47%.
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You reduce your taxable income
The more salary you put into your super, the smaller your taxable income may be – and that could mean even more savings at tax time.
Is salary sacrificing right for me?
Setting up salary sacrificing to save more for your retirement might seem like a no-brainer. In addition to considering your debt levels before adding to your super, weigh up the following:
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It’s not as effective for low-income earners
If you earn less than $37,000, you’ll only save a small amount on tax – it’s probably not worth having less in your pocket on payday for a small tax gain.
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It may impact your current benefits
When you salary sacrifice, you change your salary. This means that benefits like holiday loading and overtime might be affected if they’re tied to your salary. To protect your benefits while salary sacrificing, you’ll need to reach an agreement with your employer.
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You can’t claim deductions/tax offsets on sacrificed amounts
You also can't claim sacrificed amounts as fringe benefits tax.
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There's a $25,000 limit on concessional contributions (including employer contributions).
Any amounts over the $25,000 p.a. limit will be taxed at your marginal tax rate, plus an excess concessional contributions charge. From 1 July 2019 you may be able to carry forward any unused portion of the concessional contributions cap from previous financial years. Eligibility criteria applies, see the Super contributions limit fact sheet for full details.
How to get started
If you'd like to start adding more to your super through salary sacrificing, simply download the below form and fill it out with your employer.
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