Making a before-tax contribution to your super is known as ‘salary sacrifice’.

It involves your employer contributing some of your pretax salary or wages directly into your super fund. For many Australians, relying on your mandated employer contribution, typically a 9.5% super guarantee, may not be enough. By using a smart strategy like salary sacrifice, you could reduce your income tax and boost your super balance at the same time.

Why should I salary sacrifice?

The key advantage of salary sacrificing is that you’ll be taxed at a maximum rate of just 15% on salary sacrifice contributions and any earnings on these contributions once invested in your super fund and not at your marginal rate (which could be up to 49%). Therefore, depending on your circumstances, making salary sacrifice super contributions could reduce the amount of tax you have to pay on your salary, wages or a bonus, by up to 34% and enable you to make a larger investment for your retirement.

Key benefits of salary sacrifice:

  • ƒ You can pay less tax.
  • ƒ You can boost your retirement savings.
  • ƒ Investment earnings in super are concessionally taxed.

Key considerations

  • ƒ There are also a few things to consider before you decide whether a salary sacrifice strategy is right for you:
  • ƒ You won’t be able to access the money you salary sacrifice into super until you reach preservation age (the age at which you can withdraw super) and meet a condition of release.
  • ƒ There are limits on the amount that can be salary sacrificed into super.

Salary sacrificing into super can save tax and make a big difference to your retirement nest egg. But make sure you know all the restrictions and have considered how they may apply to your situation before you may a decision.


To find out more about salary sacrificing into super contact us on 02 6921 3682.

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