Getting money into super
Salary sacrifice contributions
Section: 2.10
2.10 Salary sacrifice contributions
Salary sacrifice arrangement is an arrangement under which an employee agrees to forego part of their total remuneration that they would otherwise expect to receive as salary or wages.
The sacrificed salary or wages do not form part of the employee's assessable income. Any superannuation contributions made under an effective salary sacrifice arrangement will constitute concessional contributions of the employee and will be included in their concessional contribution cap for the year.
Salary sacrifice example - 2023/24
Andy, aged 50, earns $150,000 p.a. excluding superannuation. He enters into a salary sacrifice arrangement with his employer to sacrifice $11,000 p.a. into superannuation. As his employer is required to pay SG of $16,500 (11% of his gross salary), by salary sacrificing this additional amount, Andy will be contributing concessional contributions up to the maximum cap of $27,500.
| Concessional Contribution Cap | 27,500 | |
| Salary excluding super | 150,000 | |
| Super guarantee (SG) 11% | 16,500 | |
| Before salary sacrifice arrangement | After salary sacrifice arrangement | |
| Salary | 150,000 | 150,000 |
| Salary sacrifice | - | 11,000 |
| Employer SG contribution (11%) | 16,500 | 16,500 |
| Total super contribution | 16,500 | 27,500 |
| Reduced salary | 150,000 | 139,000 |
| Tax on taxable income | 40,567 | 36,497 |
| Medicare levy | 3,000 | 2,780 |
| Total tax | 43,567 | 39,277 |
| Net income after tax | 106,433 | 99,723 |
Outcome:
Andy will salary sacrifice $11,000 however due to the drop in his taxable income, his take-home salary has only reduced by $6,710.
This technical resource is intended for the use of financial advisers only. It is current as at the date of publication but may be subject to change. This publication has been prepared without taking into account a potential investor's objectives, financial situation, needs or objectives. Before making a recommendation based on this material, you should consider its appropriateness based on the client's objectives, financial situation and needs. Rainmaker Group is not a registered tax agent under the Tax Agent Services Act 2009. Your client should refer to a registered tax agent before relying on information published herein that may impact their tax obligations, liabilities or entitlements.
Last modified: Monday, July 3, 2023