Salary sacrificing super

Salary sacrifice is an arrangement with your employer to forego part of your salary or wages in return for your employer providing benefits of a similar value.

One example of a salary sacrifice arrangement is to have some of your salary or wages paid into your super fund instead of to you.

If your employer makes super contributions for you through a salary sacrifice agreement you should be aware how these contributions will affect your super balance.

Salary sacrificing super

From 1 January 2020, salary sacrificed super contributions will not:

  • reduce the ordinary time earnings that your employer is required to calculate your super entitlement on

  • count towards the amount of super guarantee contributions that your employer is required to make in order for them to avoid the super guarantee charge.

Salary sacrificed super contributions are classified as employer super contributions, rather than employee contributions. If you make super contributions through a salary sacrifice agreement, these contributions are taxed in the super fund at a maximum rate of 15%. Generally, this tax rate is less than your marginal tax rate.

The sacrificed component of your total salary package is not counted as assessable income for tax purposes. This means that it is not subject to pay as you go (PAYG) withholding tax.

If salary sacrificed super contributions are made to a complying super fund, the sacrificed amount is not considered a fringe benefit.

If you are deciding whether you should salary sacrifice some of your income into your super, or if you are already salary sacrificing, you can get more information or check your entitlements under the Fair Work Act 2009.

The Fair Work Commission regulates employment agreements and conditions. To check your conditions contact Fair Work Commission.

The Fair Work Ombudsman has information on deducting pay & overpaymentsExternal Link. You can phone the Fair Work Ombudsman on 13 13 94.

Salary sacrifice limitations

Unless there are limitations specified in the terms of your employment, there is no limit to the amount you can salary sacrifice into super. However, you should also consider whether the amount you wish to salary sacrifice:

  • will cause you to exceed your concessional (before-tax) contributions cap and attract additional tax – this concessional contributions cap limits the amounts that can be contributed to your super fund and still receive the concessional tax rate of 15%

  • will attract Division 293 tax – this occurs when your income (including concessional super contributions and other components) is more than:

    • $300,000 in one year, before 1 July 2017

    • $250,000 in one year, from 1 July 2017.

Once you have used up your concessional contributions cap, you can still make after-tax contributions. The annual limit for these contributions is $110,000 but you can potentially contribute up to $330,000 using the bring-forward rule. These rules can be complex, especially if you already have a relatively high super balance.

For more superannuation information, contact us today on 03 9553 0271. We can help you understand what contributions you can make to your super whilst staying within the limitations. 

Source: ato.gov.au
Reproduced with the permission of the Australian Tax Office. This article was originally published on https://www.ato.gov.au/individuals/super/growing-your-super/adding-to-your-super/salary-sacrificing-super/
.

Important:
This provides general information and hasn’t taken your circumstances into account.  It’s important to consider your particular circumstances before deciding what’s right for you. Although the information is from sources considered reliable, we do not guarantee that it is accurate or complete. You should not rely upon it and should seek qualified advice before making any investment decision. Except where liability under any statute cannot be excluded, we do not accept any liability (whether under contract, tort or otherwise) for any resulting loss or damage of the reader or any other person. 

Any information provided by the author detailed above is separate and external to our business and our Licensee. Neither our business nor our Licensee takes any responsibility for any action or any service provided by the author. Any links have been provided with permission for information purposes only and will take you to external websites, which are not connected to our company in any way. Note: Our company does not endorse and is not responsible for the accuracy of the contents/information contained within the linked site(s) accessible from this page.

Share this post

team

CFP® Dip FP
Authorised Representative 298494
Interprac Financial Planning Pty Ltd 

Darryl Jopling

Senior Adviser

I have worked in the financial services industry since 1982 and as a Financial Adviser since 1999.

I have worked for large Financial Planning businesses, Membership based organisations and looked after the financial planning needs of clients within an Accounting Practice before starting my own business.

I am married, have 4 older children and a grandson and I am keen golfer with mixed results like many .

I have been through many of the strategies I talk with clients about myself and with my family.

I have been through the journey of seeing my parents move into Aged care and negotiated the difficulties and pitfalls of understanding the system for them and this gives me an excellent insight into what is required to assist families at this difficult time.

In a previous roll I used to run retirement seminars looking at Centrelink and Retirement Incomes and how to make these work for you. I have helped many of my clients with Aged Care advice when their parents needed to move into Nursing Homes. For many clients I assist them with superannuation, building wealth and protecting their loved ones with insurance.

I am supported by his, Licensee, Interprac Financial Planning’s in-house resources and ongoing technical, systems and training.

I am committed to understanding your needs and identifying strategies and products to help you achieve your goals.

My guiding principle as an Adviser is to design plans which help to provide my clients with clarity of purpose and the opportunity to build a solid financial foundation.
I will take the time to listen, explain things clearly and keep you informed throughout the advice process.

My experience is complemented by professional qualifications including:

  • Certified Financial PlannerTM Professional
  • Diploma of Financial Planning

At Choice Financial Advice we work with you along the way on life’s journey.

Whether you are getting married, starting a family, embarking on the trip of a lifetime, planning to enjoy your years after work or assisting elderly parents with Aged Care and Nursing Home placements, we can help.