Salary sacrificing to superannuation

Is boosting your super through salary sacrifice right for you?

Many people prepare for retirement by making additional contributions to their superannuation.

Salary sacrificing works by redirecting some of your gross salary directly into superannuation before tax, this is often done through your company’s payroll team.

What are the benefits of salary sacrificing to superannuation?

If your income is over $37,000, the main benefit could be a tax benefit. 

These extra super contributions are taxed at 15 percent, lower than the marginal tax rate payable. 

This means your sacrifice is not counted towards your assessable income or fringe benefit, for tax purposes. 

It can seem like an easy way to complement your compulsory superannuation guarantee and boost your overall superannuation balance, which could mean you have a higher balance upon retirement. 

Should I consider salary sacrificing?

If you think salary sacrificing could be an option for you, it’s important to look at your cashflow first. Do you have enough ‘breathing room’ in your current budget to allow you to push additional funds into your superannuation account?

Make sure you’ve reviewed your future financial goals as you may not be able to access an early release of these additional funds if you need it. There are many conditions for early release of super, the most common including reaching preservation age and retiring, ceasing employment after the age of 60, reaching age 65, or severe hardship.

How much can I salary sacrifice?

This can change each year so it’s important to check with your superannuation fund or other trusted advisor and make amendments accordingly.

Be mindful that the total amount of contributions includes what your employer pays on your behalf. Going over this limit could mean additional charges and/or a higher tax rate.

What is the difference between pre-tax (concessional) and after-tax (non-concessional contributions)?

Concessional contributions are where an individual has not paid their marginal tax rate on their contributions whereas, non-concessional contributions are where people contribute their own after-tax money into their superannuation.

Each have their own limits and penalties for contributing more than these limits, so refer to the ATO website for more information. 

How does the First Home Super Save (FHSS) scheme work?

Individuals who are saving for their first home are empowered to do so through their additional superannuation contributions. 

Through this scheme, voluntary concessional and non-concessional contributions to their super are invested together with the overall super balance. 

This could lead to a first home buyer increasing their deposit through investment, rather than saving money into a traditional savings account. The Australian Taxation Office (ATO) website provides more information about this scheme.  

I’ve decided I’d like to salary sacrifice. What do I do now? 

If you’ve decided this is the right decision for you, talk to your employer’s HR or payroll team to discuss what information they need from you to proceed.

RACQ Financial Planning Pty Ltd is a Corporate Authorised Representative (Representative number 293929) of Actuate Alliance Services Pty Ltd AFSL 240959, ABN 40 083 233 925. Actuate is a wholly owned subsidiary of IOOF Holdings Limited ABN 49 100 103 722. The information has been prepared for general information purposes only and does not take into account your personal objectives, circumstances or needs Any advice contained in the document is general advice and does not take into account any person’s particular investment objectives, financial situation or needs. Before acting on anything based on this advice you should consider its appropriateness to you, having regard to your objectives, financial situations and needs.