- Their only real option was to commit to an ongoing Salary Sacrifice Arrangement with their employer if it was available.
- Now, if your employer doesn’t offer Salary Sacrifice Arrangements (or you just want more flexibility in how you make extra contributions to your super), you can claim a personal tax deduction for personal contributions.
Why consider Salary Sacrificing additional money into super?
- Salary sacrifice contributions are taxed at a maximum of 15% by your super fund
- This tax rate is usually less than the tax you pay on your salary - which is about 32.5% for most people earning between $37,001 and $90,000
For many people, salary sacrifice can be useful as they effectively re-allocate what would otherwise be paid in tax to their super fund.
Why consider Personal deductible contributions into super as an alternative?
- Not all employers offer a Salary Sacrifice Arrangement
- Some employers will calculate your additional sacrifice contribution to reduce the amount of SG they must pay you
- Not all people want to lock themselves into a formal arrangement that’s difficult to stop and start, if needed
Compare the pair by the numbers
Generally, higher income earners gain the greatest benefit from either of these strategies.
- Depending on your income (and how much you can afford to contribute), a mix of both tax deductible and non-tax deductible super contributions may be a good option to discuss with your financial adviser.
The governments MoneySmart website has a calculator to help work out whether to make extra contributions before or after tax.
- From a tax and super viewpoint, a personal deductible contribution has the same net effect as salary sacrifice, as you can see in the table below.
|Original Taxable income||$80,000||$80,000|
|Salary Sacrifice amount||-||$15,000|
|New Taxable income||$65,000||$65,000|
|Tax payable in 17/18
(including Medicare levy)
(excluding super guarantee)
Maximising additional contributions with an offset account
- For people thinking about making personal contributions to their super fund once a year, consider saving your intended contribution in your mortgage offset account first until you're ready to make a personal super contribution.
- Check out the ASIC SmartMoney Super v Mortgage Repayment Tool that compares the effect of making an additional contribution to super or paying off your mortgage.