What is salary sacrifice?
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 put it straight into your superannuation. By doing so, you’ll reduce your gross taxable salary, which means you pay less income tax (provided you are currently earning above the tax-free threshold). Money going into your superannuation is taxed at 15%.
How much can I salary sacrifice?
The concessional contribution limit is currently $25,000 per year.
Concessional contributions include salary sacrificed amounts and any contributions from your employer (including the 9.5% compulsory contributions).
Excess concessional contributions will be taxed at an individual’s marginal tax rate, plus an interest charge and Medicare levy.
How do I arrange salary sacrifice?
Salary sacrifice is available at your employer’s discretion, so check with your employer to see if it’s available to you.
If you have not used your entire $25,000 before-tax super contribution limit in any one financial year, you may be able to carry-forward the unused portion to use in the future. This portion will be available for up to five years. So if you aren’t maximising your before-tax contributions now, you may be able to contribute more than $25,000 in the future.
This rule only applies if you have less than $500,000 in your super (as of 30 June in the previous financial year).
If you’d like to know more about this strategy, the financial advisers at Intrust360° will be happy to help. Just call 1300 001 360 or book an appointment online.
If you’re a low-income earner, you can also take advantage of the Government’s Low Income Superannuation Tax Offset (LISTO). This tax offset applies to any before-tax contributions you make to your super (including superannuation guarantee contributions from your employer), and can really help boost your super savings, especially if you’re working part-time.
If you earn $37,000 per annum or less and are otherwise eligible, the Government will refund the tax paid on any of the before-tax contributions you, or your employer, has made each year directly into your superannuation account, up to a cap of $500.
Unable to salary sacrifice? There is another option!
Some employers don’t offer their employees a salary sacrifice option. If this is the case for you, there is a way to access the same tax benefits that are available through salary sacrifice.
Rather than organising contributions through your employer, you can instead make a personal contribution directly to your super account (for instance, from your bank account). Simply claim a tax deduction on the contributions when you complete your tax return. These contributions will then become before-tax contributions.
This tax-advantage can be applied if you wish to make a one-off contribution.
It is important that you notify Intrust Super of your intent to claim the tax deduction before you fill in your tax return. Just complete this form and send it to us. If you do not send in this notification, your contributions will not be taxed correctly. This could result in a penalty and cause problems for your ongoing strategy.
How can I make tax-deductible contributions?
In order to make sure your deductions are taxed correctly, it is important to complete the following process:
- Set up a personal contribution, either through direct debit or BPay (your biller code and reference number can be found on your annual statement, or you can call us on 132 467 to find these out).
- Complete the ‘Taxation Notification Form’ and send it to Intrust Super.
- Wait to receive notification that Intrust Super has processed your form.
- Claim your deduction under the ‘Personal super contributions’ section in your tax return. If you use a tax agent, just give them the notification form you received from your super fund and they will process the deduction with your tax return.