If you earn more than $37,000 and are looking for a way to minimise the tax you pay, salary sacrificing a portion of your wages into superannuation could be the way to go.
After striking an agreement with your employer, you can opt to have some of your pre-tax earnings sent to your super fund, where they will be taxed at just 15 per cent.
Salary sacrificing into super is also a great way to boost your fund’s savings. There are limits, however, on how much you can contribute, plus, the amounts you choose to allocate to salary sacrificing will not be accessible until you reach your preservation age.
The Government’s MoneySmart website has a tool that helps to calculate and optimise your contributions to super.
Ideally, your employer will still send the Super Guarantee amount of 9.5 per cent of your wages to the fund, without using your sacrificed amount to meet their obligation.
It is legal for an employer to use your salary sacrifice to make up the 9.5 per cent contribution, so if you don’t want this to happen, make sure you get your new arrangement in writing.
If your employer is reducing the amount of Super Guarantee it forwards to your fund by using your sacrificed amount to achieve its obligation, there probably is no benefit in it for you.
MoneySmart also warns: “Before you sacrifice some of your salary to super, make sure your employer will continue to calculate your Super Guarantee payments on your gross income, before salary sacrifice. It is best to get this agreement in writing.
“When you salary sacrifice, your employer is entitled to calculate super contributions on your reduced salary; however, many employers will still calculate super contributions on your original gross salary.”
Dig out your superannuation statements and check you are having the contributions you are entitled to be forwarded to your fund at least once every three months.
You can also work out whether you are receiving the correct amount of super by logging into your online super account, contacting your super fund or logging into your myGov account.
If after talking to your employer, you still believe that the right amount of contributions is not being paid into your super, you can report the issue to the Australian Taxation Office.
Can you afford salary sacrificing any pre-tax earnings into your superannuation fund? If you have already been doing this, did you find it beneficial? Have you caught your employer not making the super contributions you were entitled to? And if so, what was the outcome?
How does your Super affect your Age Pension entitlements?
Disclaimer: All content on YourLifeChoices website is of a general nature and has been prepared without taking into account your objectives, financial situation or needs. It has been prepared with due care but no guarantees are provided for the ongoing accuracy or relevance. Before making a decision based on this information, you should consider its appropriateness in regard to your own circumstances. You should seek professional advice from a financial planner, lawyer or tax agent in relation to any aspects that affect your financial and legal circumstances.