Turbo boost your super savings with salary sacrifice
Making additional contributions to super while you’re still working can make a massive difference to your retirement savings, and it doesn’t have to be a big financial burden along the way either. Just like any good savings approach – setting a goal and getting into the habit of regularly putting a little extra away is the key.
Could salary sacrifice be the right approach for you?
Salary sacrifice is when you choose to have your employer regularly pay some of your salary into super instead of taking the money as after-tax pay. The salary you ‘sacrifice’ is paid directly into your super before income tax is deducted, and that could mean you pay less tax overall.
The technical term for this is a ‘concessional contribution’, and salary sacrifice is popular because it can be a tax-effective way to make extra contributions to super – these contributions are taxed at 15%, which could be lower than your personal marginal tax rate.
Just keep in mind that if you don’t provide us with your Tax File Number, your concessional contributions will be taxed at the highest marginal tax rate plus Medicare Levy, rather than 15%.
You can ask your employer whether salary sacrificing is available to you, and how to start it.
There are also limits on the amount you can contribute each year before penalties apply.
Getting advice about whether salary sacrifice is something you should consider makes sense, and the Super Advisers from Link Advice* can help you over the phone. Don’t forget that we will pay for the first piece of advice you receive on a single super issue. Simply call us to get started.
If you earn $85,000 a year, your Marginal tax rate is 39% and your total tax bill is $21,097 (including Medicare levy). If you salary sacrifice $5,000 to super, your salary is now $80,000, your income tax has reduced to $19,147 and your marginal tax rate is 34.5%. The $5,000 is contributed straight to your super fund, where it is taxed at just 15%. So overall you have gone from paying $21,097 in tax to $19,897, a saving of $1,200.