Salary Sacrificing to Superannuation

For Employees

Salary sacrificing is also known as salary packaging or total remuneration packaging. You and your employer agree for you to receive less income before tax and in return, your employer pays for certain benefits of similar value for you. This means you pay less tax on your income.

A salary sacrifice arrangement reduces your taxable income, meaning you may pay less tax on your income.

For employees, salary packaging their personal after-tax superannuation contributions is a good way to understand the concept and pay-as-you-go tax benefit, of salary sacrifice.

If an employee is currently making a voluntary after-tax contribution to a superannuation fund, then making this contribution in pre-tax (salary packaged) dollars is worthy of consideration.

Provided an employer agrees to this arrangement, some factors to take into consideration are:

  • Employee’s marginal tax rate
  • Superannuation contribution tax
  • Superannuation contribution limits

As always, an individual’s personal circumstance needs to be taken into consideration before making any financial decision. Professional advice from a qualified adviser is strongly recommended.

Benefits of salary sacrificing

You and your employer can agree on a salary sacrifice arrangement (also known as salary packaging or total remuneration packaging) to exchange part of your salary or wages for benefits of a similar value.

You can use a salary sacrifice arrangement to have some of your salary or wages paid into your super fund instead of to you. This effectively reduces your taxable income, meaning you pay less tax on your income. These concessional contributions are taxed in the super fund at a rate of 15%, which is generally less than your marginal tax rate.

How can we help you?

Contact us at Smart Wealth Financial Solutions office or submit an inquiry online.

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