#1 fund for weathering market ups and downs3
SuperRatings' Pension of the Year 4 years in a row4
Salary sacrifice to super to save on tax and grow your savings
Salary sacrifice is an arrangement between you and your employer to contribute a portion of your salary to your superannuation account before you pay tax on it, instead of it being part of your take home pay. This is an extra amount on top of your employer’s compulsory super contribution.
Investments held in super receive significant tax advantages, both before and throughout retirement. Depending on your current income, sacrificing some of your salary to superannuation could be a tax-effective strategy.
30-year-old Kelly earns $72,500 per year (excluding super), and has arranged for her employer to salary sacrifice $50 per week into her super.
If she makes this before-tax salary sacrifice contribution over a 12-month period, her income tax will decrease from around $15,480 per year to $14,576 per year (including the Medicare levy but not including any tax offset).
While her take-home pay will decrease by $1,716 over the year (from $57,021 to $55,305), she will contribute over $2,620 into her super. This will make Kelly's super $2,277 better off per year (after 15% contributions tax is deducted), and her overall finances will be $500 better off per year (extra super less the loss in take-home pay).
Continuing to salary sacrifice this amount for the next 35 years could add more than $245,000 to Kelly's balance at retirement.2
Try our salary sacrifice calculator to find how much you could benefit.
Salary sacrificing can be very tax-effective, but it’s not right for everyone.
Simply contact your payroll office to discuss salary sacrificing.
Once your arrangement is set up, you can view your salary sacrifice contributions in Member Online or in our app.
To learn more about salary sacrificing, download our Personal Contributions Guide (pdf).
Deciding what's best for you will depend on your personal circumstances, and you can get financial advice over the phone, to get the most from your super.
1. If you earn more than $250,000 per year including super, your salary sacrificed contributions will be taxed at 30%.
2. This case study is provided for illustrative and educational purposes only, and the members shown are not real. Additionally, figures may be rounded for ease of understanding. Members should seek advice from a qualified licensed professional, regarding their own circumstances. These figures were calculated using the MoneySmart super contributions optimiser calculator and the MoneySmart compound interest calculator (as at 4 November 2020). The calculation assumes savings of $33 per week (after salary sacrifice) for a time period of 35 years, the interest compounds monthly, earnings are reinvested and fully credited at the end of each month, and provides an estimate of the future value of savings, which could vary significantly over time if any change is made to these assumptions. The interest rate assumed for the compound interest calculator is 6% p.a. and is net of fees and taxes. The information should not be used as a guide to future performance of any investment. Investment returns can be positive or negative and this does not guarantee a future outcome. The total saved does not take inflation into account. Check with your chosen savings product provider in regard to actual interest calculations. These figures are provided only to demonstrate the principle of compounding. They are not intended to represent projected returns in a QSuper Accumulation account. This case study is for illustrative purposes only to show how salary sacrificing works, and does not take into account your personal tax liability. The calculation is based on tax rates for the 2020-21 financial year and it is assumed for the purpose of the case study that all terms and conditions have been met.