Salary Sacrifice Superannuation Contributions

Salary sacrifice is an arrangement between you and your employer, where you choose to give up or ‘sacrifice’ part of your before-tax salary and add it directly into your super. By doing so you’ll effectively reduce your gross taxable salary, which means you could pay less income tax. As your super contributions are taxed at up to 15% equal to the lowest marginal rate of tax, then the sacrificed amount could be more favourably taxed than if taken as cash salary and taxed at your marginal rate.

An annual limit of $50,000 applies to all before-tax contributions made to super. However, if you are 50 years of age or turning 50 before 2012 you will be able to contribute up to $100,000 a year. The cap will then revert to $50,000 from 2012 and this figure will be indexed. This includes Superannuation Guarantee contributions your employer makes on your behalf and additional contributions made through salary sacrifice. Contributions exceeding these limits will be taxed at a rate of 31.5% in addition to the standard 15% contributions tax paid.

Salary sacrifice is available at your employer’s discretion, so check with your employer to see if it is available to you.