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Building your super balance

Smart ways to boost your super savings


Complete the salary sacrifice form to start making before-tax contributions to your super. Download now

Boost your super and potentially manage your tax at the same time


What are salary sacrifice contributions?

Making a before-tax contribution to your super is known as ‘salary sacrifice’. It involves your employer contributing some of your pre-tax salary or wages directly into your super fund.

For many Australians, relying on your mandated employer contribution, typically a 9.5% super guarantee, may not be enough. By using a smart strategy like salary sacrifice, you could reduce your income tax and boost your super balance at the same time.

You should consider whether the salary amount sacrificed will attract an additional 15% tax – broadly, this occurs when you have an income and concessional super contributions of more than $300,000 in the 2016/17 financial year.*


Why should I salary sacrifice?

The key advantage of salary sacrificing is that you’ll be taxed at a maximum rate of just 15%* (or 30% if you are also subject to the additional 15% tax) on salary sacrifice contributions and any earnings on these contributions once invested in your super fund and not at your marginal rate (which could be up to 49%).

Therefore, depending on your circumstances, making salary sacrifice super contributions could reduce the amount of tax you have to pay on your salary, wages or a bonus by up to 34% and enable you to make a larger investment for your retirement.

The table below gives a good indication of what the Association of Super 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.
 

 

*You should consider whether the salary amount sacrificed will attract an additional 15% tax - broadly, this occurs when you have an income an concessional super contributions of more than $300,000 in the 2016/17 financial year.

Important information

It has been announced in the 2016 Federal Budget, however not yet legislated, that from 1 July 2017 the threshold at which high income earners pay additional contributions tax (Division 293) will be lowered from $300,000 to $250,000.

   


The benefits of investing in super over 20 years

  • Receive $5,000 pay rise as after-tax salary each year and invest outside super: $123,730
  • Sacrifice $5,000 pay rise into super each year: $179,544
     

Assumptions: A 20 year comparison based on $5000pa of pre-tax salary. Both the super and non-super investments earn a total return of 7.74% (growth 4.06% income 3.68% franking 28.55%). All investment income is reinvested.  Both investments are cashed out at the end of the 20 year period.  All figured are after income tax (at 15% in super and 39% inclusive of Medicare outside super) and capital gains tax (including discounting). These rates are assumed to remain constant over the investment period.  William’s salary of $100,000 pa isn’t indexed.

Get started. Complete the salary sacrifice form to start making before-tax contributions to your super.  Download now

Before contributing to your super, you should consider your contribution caps and seek further advice where required.
Visit the ATO website to find out more.