If you’re able to, making extra contributions through salary sacrificing can have a SUPER impact on your financial future.
But first, what even is salary sacrificing? This is where you take part of your before-tax salary and add it to your super account. As well as growing your super balance, it could also bring down your taxable income and therefore the tax you pay. Win-win!
Instead of being paid your whole salary into your bank account each payday, you can choose to take an amount of money from your salary for your employer to add to your super account.
This payment is made before your income tax is taken out, and instead is taxed at 15%, which is generally lower than most people’s income tax rate. You’ll see the payment on your payslip the same way you see your standard super payments.
Just a heads up: while a lot of employers offer salary sacrifice payments, there are some that don’t. So, make sure to check it’s something your employer offers first.
There’re two potential benefits to adding to your super through salary sacrifice.
Even the smallest extra payments can make a big difference to your super balance. Every dollar that you add to your super today, could keep growing ready for when you retire.
Salary sacrifice payments are generally taxed at 15%. This is usually lower than any most people’s income tax rate. On top of this, these payments can reduce your taxable income, which means you could get a nice tax refund come tax time!
Before you jump in, make sure you consider your current financial situation. Speak to a financial adviser about if and how much you can afford to put away into your super. Remember, you won’t be able to access this money until you retire.
If you’re sure salary sacrificing is right for you, speak to your employer about how much you’d like to take from your pay. Your employer will then set up automatic contributions each pay day.
Salary sacrificing makes up part of your yearly before-tax contributions cap, which is $27,500. If you go over this limit you will pay extra tax. If you don’t know what this is but want to learn more about it, head to Caps on Super Contributions.
Also, make sure to consider your annual income as if you earn less than $58,445 a year, you might be better off making after-tax contributions instead. By making after-tax contributions, you could get extra money added to your super from the government through government co-contributions.
Page last updated 1 December 2023
