Asset Super

Sacrifice to build your super and save tax

If you're earning at least $35,000 per annum, a very tax-effective strategy may be to make voluntary contributions made out of your pay before it is taxed. This is known as salary sacrifice.

With salary sacrifice, you and your employer agree that a certain amount of your pay will be put into your super rather than you receiving it as taxed income. The advantage, obviously, is that you avoid paying income tax on the amount of the contribution, but rather pay contribution tax of 15%.

The higher your salary earnings, the greater the tax advantage.

You should consider the following tips before proceeding with any salary sacrifice arrangement:

• Check that your employer allows you to salary sacrifice.
• Make sure your employer will continue to pay your 9% super guarantee contributions on
  your full pay – not your reduced figure.
• Make sure any arrangement you enter into with your employer is in writing.
• Don’t exceed the contribution limits. There is an annual contribution cap that applies to your employer contributions (that is your Super Guarantee and your salary sacrifice contributions combined). Click here for more information on the limits.
• Make sure that your fund has your tax file number – without it the tax effectiveness of your strategy is ruined.
• From 1 July 2009 any pay that you sacrifice into super will be added back and counted as income for the purposes of calculating eligible Government co-contributions. Click here for more info on the Government co-contribution scheme.