Written by James Price in Blog.
More super, less tax
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.
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.
Tax benefits of salary sacrifice are:
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: