Salary sacrifice is an arrangement with your employer to forego part of your salary or wages in return for your employer providing benefits of a similar value. In other words, it is a pre-tax contribution from your income to your super account. These pre-tax contributions reduce your taxable income so you may pay less tax and have more money in retirement.
How to plan your salary sacrifice?
First, you must compare your income and expenses and work out how much of your income you can give up now. Then, you need to enter into an arrangement with your employer as to how much additionally would you want to be redirected to your super account instead of being paid in wages.
An agreement to salary sacrifice with the employer must be in writing and clearly state
- The base salary and;
- The amount being sacrificed from wages.
How much you can salary sacrifice?
For individuals under 50, there applies a cap of $30,000 in total pre-tax contributions, and is $35,000 if you are over 50. This annual limit includes the mandatory 9.5% super contribution paid by your employer.
Tax benefits of salary sacrifice.
The Australian Taxation Office treats the salary sacrificed super amount differently and one pays only 15% tax on that as against the marginal rate of tax which is much higher in most instances.
Any amount above the maximum pre-tax contribution will be subject to your normal tax rate and not the concessional rate of 15%.
You can always get back to us if you need further information on this issue and seek our assistance on salary sacrifice super arrangement.
For further assistance, please contact Taxplanners on 1300 000 TAX (1300 000 829), 03 9600 0143 (10 Lines).
You can also visit our office for assistance –
Melbourne CBD – Suite 411-413, Level 4, 343 Little Collins Street, Melbourne
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