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How salary sacrificing into super works

An easy way to grow your super without changing your lifestyle is by salary sacrificing into it. This means you ask your employer to put some of your before-tax income directly into your super fund — this also reduces your taxable income. The amount you contribute to your super through salary sacrificing is in addition to the Super Guarantee contributions your employer must be making — it’s not a substitute for it.

Two benefits to sacrificing into super.

1. Build your super faster.

Quite simply, the more money you put into your super, the faster your super balance builds, and the more you’ll have at retirement. The earlier you start this process, the more you’ll reap the benefits of compound interest.

2. Pay less income tax.

When you salary sacrifice, the money that is designated to your super comes out before you get taxed. This means your taxable income is reduced, and as a result, so are the taxes you pay on it. You may be able to reduce what you pay in income tax for the financial year. In case you were wondering, if you earn under $250,000 a year, you’ll only pay 15% tax on contributions made through a salary sacrifice arrangement. If you earn over $250,000 a year, that doubles to 30%.

How much to contribute.

You can make up to $27,500 of concessional contributions to your super each year without incurring extra tax. You can contribute more if you want to, however, you’ll be charged extra tax if you do. Aside from those two points, the amount you salary sacrifice to your super is really up to you.

Get advice.

We can advise you on the optimal amount to contribute, based on your income and lifestyle, and put you in touch with a financial advisor if needed. Contact us to talk about this in more detail — we’d love to set you up for salary sacrifice success.

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