Boost your super and potentially manage your tax at the same time
What are salary sacrifice contributions?
Salary sacrifice is an arrangement with your employer to take some of your pre-tax salary or wages and contribute directly into your super fund.
Why should I salary sacrifice?
If you salary sacrifice to super, you could reduce your income tax and boost your super balance at the same time.
The key advantage of salary sacrificing is that you’ll be taxed at a maximum rate of 15%1 (or 30% if you’re also subject to the additional 15% tax) on salary sacrifice contributions and not at your marginal tax rate, which could be up to 47% including Medicare Levy. In addition, investment earnings on these contributions are taxed at a maximum rate of 15% once they’re invested in your super fund.
The table below gives an indication of what the Association of Superannuation Funds of Australia (ASFA) suggests you currently need at retirement to enjoy a comfortable lifestyle. Salary sacrificing is a great way to reach these goals faster and more effectively.