Putting more money into super is great for building your retirement savings, but did you know it could also save you in tax?

A comfortable retirement will cost the average couple around $59,236 per year, according to the Association of Superannuation Funds of Australia. Based on Budgets for various households and living standards for those aged around 65 (December Quarter 2015, national).

For some of us, that could mean the 9.5% our employers contribute won’t be enough to live on during retirement, which is why the Government encourages everyone to put more money into super.

One way to do that is through pre-tax salary sacrificing. Any contributions you make with pre-tax dollars are taxed at 15% - which is generally much lower than your marginal tax rate.

So if your marginal tax rate is above 15%, every dollar you put into super through salary sacrificing is worth more to you than that dollar in take-home pay.

[1] Based on Budgets for various households and living
standards for those aged around 65
(June Quarter 2015,
national). Source:
http://www.superannuation.asn.au/resources/retirement-standard
[1] Based on Budgets for various households and living
standards for those aged around 65
(June Quarter 2015,
national). Source:
http://www.superannuation.asn.au/resources/retirement-standard
Show me how to set up salary sacrificing

Stay aware of pre-tax contribution caps

There are annual caps on how much you can contribute to super from your pre-tax income.

If you and/or your employer put more than $30,000 of your pre-tax income into super in a year, you may end up needing to pay extra tax. That cap increases to $35,000 per year if you are 50 or over any time during that financial year.

This cap is inclusive of the 9.5% super guarantee from your employer. It’s also a combined total across all funds you might have, which is important to keep in mind if you’re putting money into multiple super accounts.

All contributions above the maximum amount for your age group will be considered part of your assessable income and taxed at your marginal tax rate.

If you go over the cap, the Australian Taxation Office will give you an opportunity to apply for a refund of up to 85% of the excess contributions. You'll also receive a 15% tax offset in your tax return.

Looking for guidance?

Talk to us

How to boost your super with salary sacrificing

Salary sacrifice is an arrangement between you and your employer.

To set up regular payments, contact your payroll or HR department to confirm they offer salary sacrificing.

If they do, simply fill out the Contributions by payroll deduction form and hand it to your employer. There are no special requirements about eligibility – anyone with an employer who offers salary sacrificing can do it.

It’s important to understand however that contributing to super through salary sacrificing may reduce the amount your employer contributes.

Your employer is required to contribute 9.5% of your gross income to super.

When you salary sacrifice into super, your gross income is reduced by that amount. So if you’re earning $55,000 per annum before tax and you sacrifice $5000, then your gross income for the purposes of calculating the 9.5% your employer must contribute is $50,000. So it's best to check with your employer first.

I’d like to speak to someone who can tell me more

Learn more

About salary sacrificing

305.2KB PDF

Adding more to super

384.8KB PDF

Tax and super

818.5KB PDF

Advice when you need it

Over the phone or face to face

Related topics

Tags: