Super Strategies – sacrifice pre-tax salary into super

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Contributing some of your pre-tax salary, wages or a bonus into super could help you to reduce your tax and invest more for your retirement.

HOW DOES THIS STRATEGY WORK

With this strategy, known as salary sacrifice, you need to arrange for your employer to contribute some of your pre‑tax salary, wages or bonus directly into your super fund.

The amount you contribute will generally be taxed at the concessional rate of 15%¹, not your marginal rate which could be up to 47%².

Depending on your circumstances, this strategy could reduce the tax you pay on your salary, wages or bonus by up to 32%.

Also, by paying less tax, you can make a larger after‑tax investment for your retirement.

WHAT INCOME CAN BE SALARY SACRIFICED?

You can only sacrifice income that relates to future employment and entitlements that have not been accrued.

With salary and wages, the arrangement needs to be in place before you perform the work that entitles you to the salary or wages.

With a bonus, the arrangement needs to be made before the bonus entitlement is determined.

The arrangement, which should be documented and signed by you and your employer, should include details such as the amount to be sacrificed into super and the frequency of the contributions.

OTHER KEY CONSIDERATIONS

  • Salary sacrifice contributions count towards the ‘concessional contribution’ cap (which is $25,000 in 2019/20) and tax penalties apply if you exceed the cap.
  • You can’t access super until you meet certain conditions.
  • Salary sacrificing may reduce other benefits such as leave loading, holiday pay and Superannuation Guarantee contributions.
  • Another way you may be able to grow your super tax‑effectively is to make personal deductible contributions.
  • If you did not use up your concessional contributions cap in 2018/19, and meet certain conditions, you may be eligible to carry forward the unused cap amount. This could enable you to make concessional contributions exceeding the annual cap in 2019/20 or a future financial year³.

SEEK ADVICE

Your Westlawn Financial Adviser can help you determine whether salary sacrifice suits your needs and circumstances.

PERSONAL DEDUCTIBLE CONTRIBUTIONS

You may be eligible to claim a tax deduction for personal super contributions, regardless of their employment status.

Like salary sacrifice, this strategy may enable you to boost your super tax‑effectively. There are, however, a range of issues you should consider before deciding to use this strategy.

Your Westlawn Financial Adviser can help you determine whether you should consider making personal deductible contributions instead of (or in addition to) salary sacrifice.

For more information see Make tax-deductible super contributions.

Your Westlawn Financial Adviser can help you assess all the issues that need to be considered and determine whether salary sacrifice suits your needs and circumstances.

Contact us today:

¹ Individuals with income above $250,000 in 2018/19 will pay an additional 15% tax on salary sacrifice and other concessional super contributions within the cap.
² Includes Medicare levy.
³ Unused cap amounts can be carried forward for up to five years. Other conditions apply. To find out more, visit ato.gov.au.

Source: MLC (National Australia Bank Limited ABN 12 004 044 937, AFSL 230686)

General Advice Disclaimer

All of the material published on this website is for information purposes only and does not constitute advice. This information is of a general nature only and has been provided without taking account of your objectives, financial situation or needs. Because of this, we recommend you consider, with or without the assistance of a Financial Adviser, whether the information is appropriate in light of your particular needs and circumstances.
Westlawn Wealth Management Pty Ltd ABN 32 124 861 409 Corporate Authorised Representative of Affinia Financial Advisers Limited ABN 13 085 335 397 AFSL No. 237857. Please note that Affinia Financial Advisers Limited is not responsible for the advice and services provided by Westlawn Finance Limited, Westlawn Insurance Brokers Pty Ltd, Westlawn Life Insurance Pty Ltd or Westlawn Business Services Pty Ltd.

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