Salary Sacrifice

I don’t know of too many people that love superannuation and less that want to boost their existing superannuation contributions, however the advantages are great if used correctly. Firstly what is salary sacrificing? If you are paid $50000pa then your employer pays 9% of this amount, being $4500 to your nominated super fund over a 12-month period. He then pays the $50000 to you less tax as your wage. If you were in a position to salary sacrifice $10000pa this would increase the super contribution to $14500 and you would be paid $40000 less tax as a wage.

The benefit to you is that you will reduce the tax you pay from your wage by $10000 times 30%, being $3000. The downside is the $10000 goes to super and your cash flow is reduced. The ATO takes 15% of salary sacrifice via a contributions tax so your net position is better by $1500. If you earn between $80000 and $180000 then the benefit would be $2500.

My message though is that whilst most wouldn’t sacrifice $10000pa it is a good idea to contribute a bit extra each fortnight if possible, even $100pf will make a huge difference over a long period and you can stop it at any time. Maybe the next time you get a pay rise, put some of it into super or if you receive a lump sum bonus you can consider this.

Just remember that super is a tax effective vehicle and whilst you generally can’t touch the funds until retirement, sometimes that’s a good thing as it acts as a forced saving.