Salary Sacrifice Into Superannuation

More super, less tax


What is salary sacrifice?

Put simply, salary sacrificing is a pre-tax contribution from your income to your super account, so you’ll have more money to enjoy in retirement. These pre-tax contributions reduce your taxable income so you may pay less tax.

How does salary sacrificing work?

First, you need to look at your income and expenses, and work out how much of your income you can comfortably give up now, and invest for your retirement.

Then you need to arrange with your employer to regularly redirect that amount of your wage to your super account instead of your bank account or pay check.

The portion of income you salary sacrifice into your super is taxed at 15%. The amount of tax payable on your wages is in most instances, considerably higher.

Salary sacrifice also increases the amount of money you can enjoy when you retire.



What are the tax benefits?

Tax benefits of salary sacrifice are:

  • The amount you salary sacrifice to super is only taxed at 15%
  • If your Australian tax rate is higher than 15%, then you’ll benefit from a better tax rate on the amount you salary sacrifice

How much can I salary sacrifice?

To prevent high income earners using salary sacrificing as a way of avoiding lots of tax, there is a limit on the amount you can contribute each year. These superannuation contribution limits are known as concessional contributions caps. Here are the guidelines:

  • The annual limit includes the 9.5% compulsory super contribution paid by your employer
  • If you’re not yet 50, a maximum of $25,000 in total pre-tax contributions applies
  • If you are 50 or over, the maximum pre-tax contribution including SGC is $35,000 in 2015/16. This reduces to $25,000 in future years.