What is salary sacrificing?

Looking for a way to boost your super? You might want to salary sacrifice superannuation contributions.

What's the key learning?

When it comes to super, there are lots of different ways you can give ya balance a lil boost, or a big one!

The main way you build up your superannuation is through your employer contributions - aka the super guarantee (SG). This is currently set at 11.0% of your base salary as of July 1 2023.

That means if you earn $70,000 per annum, your employer will be required to contribute $7,700 into your chosen super fund.

The good news is that the super guarantee (SG) is growing to 12% by 1 July 2025 - which means more money in your pocket (long term!).

What about salary sacrificing?

Depending on your employer, you may also be able to set up an agreement to salary sacrifice into superannuation.

How does salary sacrificing work?

If you and your boss come to an arrangement where you can salary sacrifice into your super, you will basically give up (sacrifice) some of your before-tax salary, and have it directed to your super.

What are the benefits of salary sacrifice agreements?

The biggest benefit of directing your before-tax salary into your super is that you might end up paying less income tax. The ‘why’ of this is kinda complicated, but hear us out!

When you salary sacrifice, your contributions are taxed at 15%, which will certainly be lower than your marginal tax rate (if you’re above the tax-free threshold).

Let’s say you’re earning $70,000 per annum

If you choose to salary sacrifice $10,000 of your salary: you’ll pay $1,500 in tax (15% tax rate)
If you don’t choose to salary sacrifice $10,000 of your salary: you could pay $3,250 in tax (32.5% marginal tax rate).. or even more!

So you can see that by salary sacrificing, you’re able to save $1,750 in tax. That’s great! Only downside is that you won’t be able to access this money until retirement.

Is there a limit to salary sacrifice super contributions?

Unfortunately, you can’t have too much of a good thing. Yep, there is a limit to how much extra you can contribute to your super via a salary sacrifice agreement. And it’s $27,500 per financial year, including the amount your employer pays as part of the super guarantee.

So again, if your employer is already contributing $7,350 to your super fund, then you can only salary sacrifice $20,150 in addition.

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