What is salary sacrifice?
Salary sacrifice is an easy way for you to make additional payments into your super. By setting up an agreement with your employer, your employer will redirect a proportion of salary (before-tax) into your super account.
It’s a great way to increase your super balance on top of the SG contribution your employer is required to make on your behalf.
Before-tax salary paid directly into your super account is taxed at 15%. If this is less than your normal tax rate, you could save more in super and reduce your taxable income.
Seek financial advice to make sure salary sacrifice is right for you.
Savings and tax benefits of salary sacrifice
- Depending on your income, there can be considerable savings and tax benefits to salary sacrifice. The additional payments you make through salary sacrifice are taxed at 15%. This is likely to be lower than your normal taxable income, so you could save more in super than if you had made an after-tax contribution.
- By reducing your salary through salary sacrifice, you may reduce your overall taxable income.
- Over time, you’ll see the power of compounding interest in your super fund. As your account grows over time you’ll find that even a little extra contribution now can add much more to your savings in retirement.