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Salary sacrifice - what you may not know
While salary sacrifice has been traditionally used for benefits such as cars, car parking and health insurance, more and more people are using it as a tax effective way to make additional contributions to their superannuation.
Your employer can contribute more to your super than the 9% required by the Government using a ‘salary sacrifice’ arrangement.
Salary sacrifice means regular amounts are deducted from your salary before tax is paid at your marginal rate. This is a prime example of what is commonly known as ‘salary packaging.’
These super contributions are also tax deductible for your employer. There are, however, limits to the amount which can be contributed each year. Not all employers offer this arrangement, so it’s worth speaking to your employer when negotiating or reviewing your salary.
The benefits
- Contributions are paid in pre-tax dollars and are therefore not taxed as income before being placed in the super fund;
- Contributions are taxed at 15% in the fund, which is lower than most personal tax rates. This means that you’ll have more dollars working for your retirement savings than would be the case if you made normal (after tax) member contributions.
- contributions made through a salary sacrifice arrangement to a complying super fund are Fringe Benefit Tax (FBT) exempt.
Salary sacrifice arrangements are only one component of salary packaging. If you’re eligible for salary packaging, a qualified financial planner can help you structure your package to suit your particular financial needs and objectives.
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Further Information |
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