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Grow your super and pay less tax.
Salary sacrifice is an arrangement with your employer to pay part of your gross (before tax) pay directly into your super account.
This type of contribution is known as a concessional contribution and can help grow your super for a more comfortable retirement whilst reducing your personal income tax.
The super contribution tax rate is generally 15% on salary sacrifice payments and is less than most people’s individual income tax rate (between 34% and 46.5%, including Medicare Levy).
For further details regarding contribution tax levels pls visit www.ato.gov.au/super or call 13 10 20.
A little each pay does add up
By salary sacrificing a little amount each pay, you can boost your super considerably without the need to budget for a large annual ‘one-off’ contribution.
The table below shows how salary sacrificing from your gross pay (before-tax) can add more to your super.
Decrease in take home pay
Annual tax saving
Super* NO salary sacrifice
Super* with salary sacrifice
Difference in Super*
Assumptions: 30 years of age, $20,000 super, $65,000 annual income, 9% employer SG contribution, 7% p.a. investment earnings, $1.25 per week administration fee, 0.69% investment management fee, $104 p.a. insurance premium and 3% inflation p.a.
*Super as at age 65
How much can you salary sacrifice?
The total concessional contribution limit is $25,000 for the 2012/13 financial year. Any excess concessional contributions above these limits will be taxed at a higher rate.
The Government allows a one-off refund of excess concessional contributions for first time breaches to the cap of $10,000 or less.
Visit www.ato.gov.au/super or call 13 10 20 for further details. The concessional contribution limit can change in the future.
Please note: Your concessional contributions limit includes your employer superannuation guarantee (SG) and salary sacrifice contributions.
Things to consider before you salary sacrifice
Is it available for you?
- Salary sacrifice arrangements are not available to everyone and not all employers will offer the option.
- If you are paid under an Award, you may not be able to sacrifice your salary to a level below what is stipulated in your Award.
- Tax treatment of salary sacrifice (before-tax) contributions is different to that of personal super contributions (after-tax), therefore it may not suit your circumstances
- Call 1300 130 780 and talk to a qualified LUCRF Super Representative for personalised financial advice.
- When making a decision, ask your employer which gross pay figure they will be using to calculate your 9% SG contributions – will it be before or after your salary sacrifice has been deducted?
- Example: If you gross $50,000 p.a. and you salary sacrifice $5,000 p.a., your employer may pay your SG contribution on $45,000 instead of the $50,000 you are earning.
- Ask your employer for clarification.
- If you are aged between 65 and 75, you will need to meet the work test (which requires that you work a minimum of 40 hours in a continuous 30-day period during the financial year) to make either personal or salary sacrifice contributions to your super.
- If you are aged 75 or over, you are not eligible to contribute.
How to start salary sacrificing
Simply complete a Request for Payroll Deduction form and hand it directly to your payroll department. Your employer will notify LUCRF Super of the contribution type and amount when making your superannuation payments.