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.
Salary sacrifice can be a good way to grow your super. It involves giving up some of your pay and putting it into your super instead. As a result you will save tax and boost your super.
Apart from increasing your retirement savings, there may be tax advantages in making super contributions through salary sacrifice.
By ‘sacrificing’ some of your before-tax salary and putting it into your super fund, you get taxed in the super fund at a maximum rate of 15%. This is because the sacrificed component of your total salary package is not counted as assessable income for tax purposes, therefore not subject to PAYG withholding tax. This arrangement suits higher income earners due to their higher marginal tax rates.
Additionally if the salary sacrificed super contributions are made to a complying super fund the scarified amount is not considered a fringe benefit.
The Moneysmart webpage has a range of superannuation tools a taxpayer can use, including calculators to show how you can boost your super and how much super you’ll likely have when you retire.
If you would like to explore the options available to you through salary sacrifice speak with us.