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Salary sacrificing explained

Super | | 2 min read

Salary sacrificing can be a tax-effective way to boost your super. It means you pay some of your pre-tax salary into your super account.  

This has two potential benefits. 

• You may pay less tax on your income (15% on the amount you contribute, rather than your marginal tax rate)

• Your super grows and benefits from compounding interest  

In other words, you forgo some of your take-home pay so you can invest that money in your future. 

So how do you start, and what kind of difference can salary sacrificing make in the long term? Let’s take a closer look.

Who can salary sacrifice?

If you’re working and receive a regular income you should be able to salary sacrifice. This is usually organised by your employer. It should be as simple as letting them know how much you’d like to salary sacrifice and how often. 

How much can I salary sacrifice? 

You can start small. It could be as little as $10 a week. It’s up to you, and you can always increase or decrease the amount. 

The only thing you need to be aware of is your annual contribution cap – that is, how much you can pay towards your super in any given year. This is currently set at $27,500 in pre-tax contributions. *

This amount includes both your regular Super Guarantee (SG) contributions that your employer makes plus anything extra you might add by salary sacrificing.

For example, if you earn $100,000 a year, your Super Guarantee (SG) contribution would be $10,500. That’s 10.5% of $100,000. Which leaves another $17,000 in potential contributions. 

But even a modest contribution can make an impact over time. Especially if you start early and are consistent. 

*There are additional ‘carry-forward’ rules that you can read about on the ATO website.

What are the long-term benefits?

Salary sacrificing can help boost your long-term super balance, which means a more comfortable retirement. The money you contribute not only benefits from a lower tax rate, but it grows over time, thanks to both investment returns and compounding interest. Which simply means that your returns also earn returns. 

Our Retirement Calculator allows you to try different scenarios and see how salary sacrificing can impact your long-term super balance.

How do I start?

Getting started is easy. Most employers offer salary sacrificing. Talk to your payroll department and let them know how much you’d like to salary sacrifice to your super and how often. They can then make the necessary adjustments to your pay – which will be noted on your pay slips.

Authorised by Togethr Trustees Pty Ltd (ABN 64 006 964 049; AFSL 246383) ('Trustee') the trustee of the Equipsuper Superannuation Fund (ABN 33 813 823 017). Catholic Super is a division of the Equipsuper Superannuation Fund (ABN 33 813 823 017). Financial advice services may be provided to members by the trustee's related entity. 

Togethr Financial Planning Pty Ltd (ABN 84 124 491 078; AFSL 455010). The information contained herein is general information only. It has been prepared without taking into account your personal investment objectives, financial situation, or needs. It is not intended to be, and should not be, construed in any way as investment, legal or financial advice. Please consider your personal position, objectives, and requirements before taking any action. Past performance is not a reliable indicator of future performance.

© 2020 Togethr Trustees Pty Ltd. For further information please our contact our Service Centre on 1300 655 002 or visit our website: csf.com.au.

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