Salary sacrifice

Many employees can sacrifice some of their salary in return for increased super contributions from their employer.

How it works

Wage and salary earners pay income tax based on marginal tax rates, which range from 19% to 45%, plus the 2% Medicare Levy.

By arranging with your employer to pay part of your salary into super rather than your bank account, only the 15% contributions tax is payable.

This means you pay less income tax and have more money working for you in your super account.

If you earn more than $250,000, extra contributions tax may be payable.

Things to consider

Salary sacrifice can be a great way of growing your super, but it isn’t for everyone.

Here’s a list of things to look out for:

  • Don’t leave yourself short of money. There’s no point putting extra into super if you’re not left with enough income to meet your commitments. 
  • Salary sacrifice works best for middle to higher income earners. If you earn less than $37,000 you may not get any tax benefits.
  • Although salary sacrifice reduces your taxable income, your assessable income (used to calculate various tax rebates and Family Tax Benefit) may not change.
  • Make sure you understand the agreement. At the moment, employers can bend the rules and count salary sacrificed amounts towards their Superannuation Guarantee obligations (draft legislation to abolish this loophole exists).

Some people may prefer to make personal contributions to super from their after-tax pay, then claim the contribution as a tax reduction.

Learn more about making extra contributions

How do I get started?

Salary sacrifice is an arrangement between you and your employer so speak to your payroll area to find out how to get started.

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