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Salary sacrificing to your super
A way to grow your super which could reduce your tax bill
Salary sacrificing to super is a popular way to top up your super because, not only can it give you more money in retirement, but it could help you save on tax right now.
What is salary sacrifice to super?
Salary sacrifice to super is where you arrange for your employer to automatically pay some of your regular wage into your super account instead of directly to you. If you earn less than $250,000 per year, the amount you sacrifice is taxed at only 15% instead of your income tax rate which could be higher. Your employer can adjust your PAYG tax straight away, so you don't even need to wait till tax time. Check with your employer to see how this applies to you.
Is salary sacrifice into super a good idea?
If you're earning a wage, and find that you're not using up all your take-home pay each month, making extra contributions of your own to your super through salary sacrifice can boost your income in retirement.
If you're not sure, book a chat with one of our super specialists.
How much can I salary sacrifice into super?
The amount you can salary sacrifice to super will depend on how much superannuation your employer pays under the super guarantee. This is because pre-tax contributions are capped at $30,000 and includes super paid by your employer. So, in simple terms, the amount you can salary sacrifice is $30,000 minus your employer's super contributions. Note that using the ‘carry forward rule‘, you might be able to use unused caps from previous years.
If you wish to make additional contributions to your super over and above the cap, you can always make non-concessional (after-tax) contributions from your taxed income.
Examples
James, 30
James wants to salary sacrifice $35 per week ($1,820 annually). He earns $65,000 per year, has $50,000 in super and plans to retire at 67. Let's see the difference salary sacrifice could make to his super balance at retirement.
| No salary sacrifice | With a salary sacrifice of $35 per week | |
| Pre-tax pay per week | $1,250 | $1,215 |
| Salary sacrifice per week | $0 | $35 |
| Super balance at retirement | $475,770 | $564,667 (an extra $88,897) |
Mary, 45
Mary wants to contribute $2,600 to her super each year to reduce her taxable income and boost her super balance in retirement. She earns $90,000 per year, has $150,000 in super and plans to retire at 67. Let's see the difference this extra contribution could make to her tax each year, and her super balance at retirement.
| No extra contribution | With an extra yearly contribution of $2,600 | |
| Pre-tax income per year | $90,000 | $87,400 |
| Extra contribution per year | $0 | $2,600 |
| Tax savings per year | $0 | $442 |
| Super balance at retirement | $501,768 | $556,788 (an extra $55,020) |
These examples were calculated using MoneySmart's superannuation and income tax calculators. Please go to moneysmart.gov.au to see or vary assumptions.
How to salary sacrifice to super in four simple steps
- decide if you would like to salary sacrifice, and what you can afford each month.
- make sure the total of your employer's contribution plus salary sacrifice won't go over the $30,000 before-tax contribution cap. Note that using the ‘carry forward rule‘, you might be able to use unused caps from previous years.
- tell your employer that you'd like to salary sacrifice into super, and how much to transfer to your super each month.
- check your payslip on the first month that your salary sacrifice has been deducted. Your monthly income tax should have gone down.
Are super contributions tax deductible?
Your super contributions can be a tax deduction at tax time if, instead of salary sacrificing, you use the contribute and claim system, where you make the payments yourself and then claim a deduction. If you earn less than $250,000 per year, those contributions are usually taxed at 15% instead of your normal (often higher) tax rate.
If you salary sacrifice to super, those contributions have the tax benefit applied immediately and automatically through your PAYG tax.
If you want to make use of the contribute and claim system, you can:
- work out if and how much you want to voluntarily contribute, keeping in mind there is a cap of $30,000 per year on the total amount of before-tax contributions, and you may be able to use the ‘carry forward rule‘.
- well before 30 June, transfer your chosen amount to Prime Super via BPay® - you'll find the details in your MemberOnline login section.
- download an ATO Notice of intent to claim for personal super contributions form, fill it out and post it before one of the following takes place: the end of the next financial year; you lodge you tax return for the current financial year; or before you move any money out of your super account.
- you will receive a notification from us acknowledging your intention to claim a tax deduction, providing details on the 15% contributions tax that has been deducted, and that you can now include this amount in your annual tax return and where relevant provide this notice to your tax accountant.
It's important to remember that you cannot claim for employer contributions or salary sacrifice payments.
The need for speed in June
In order to claim your tax deduction, you must make sure that, before the end of the financial year, Prime Super receives the funds you wish to contribute.
We're here to help - book a chat with one of our super specialists.