Tax Effectiveness of Salary Sacrificing 

Salary sacrificing to superannuation is an easy and tax effective way to boost your retirement savings.

It is an agreement with your employer to place some of your pre-tax salary into your superannuation fund. The benefit of this is that you can boost your super before income tax is deducted from your salary.

Why is salary sacrificing to super tax effective?

Your salary sacrificed contributions to super are usually taxed at 15% on entry to your fund, which is typically much less than most marginal tax rates.

There is even a greater benefit for high income earners. If you salary sacrifice a portion of your income to superannuation, then the remaining portion of your salary may fall into a lower income tax bracket. This means that your salary may be taxed at a lower rate.

Greater investment returns

Let's compare the dollar value of salary sacrificing to super, versus keeping your full salary earnings.

Salary sacrificing to super means that 85 cents of every dollar can be invested in your fund. On the other hand if you decide to keep your full salary earnings, you may be only left with 53.5 cents for every dollar (on the highest marginal tax rate including the Medicare levy).

If we put this in real life terms and salary sacrifice $1000 to superannuation, you would have $850 to invest in your super fund as opposed to $535 to spend if you kept your salary earnings.

Get your first Superannuation Consultation FREE!
Talk to a Specialist Superannuation Adviser on 1300 135 205 about growing your superannuation today!

July 2011