Is salary sacrifice worth it?
September 29th, 2016
Your 30s and 40s can be among the most expensive years of your life. You might have school aged kids, with all the money haemorrhaging that entails, and you’re likely living life to the fullest, going on holidays, eating out and going to concerts. But finding a spot within all that spending to make some sensible financial moves will pay off in the long term.
Salary sacrificing has the dual benefits of reducing your taxable income and boosting your superannuation. You’ll pay only 15 per cent tax on the proportion of your income you redirect to your super. Just make sure you stay within the limits ($30,000 if you’re under 50, $35,000 if you’re over 50, each including your employer’s annual contribution). Even a small addition to your superannuation can make a major difference when it comes to retirement. And salary sacrificing is not for high-rollers.
For example, you earn $60,000, but you can afford to take home $67.50 per week less without it breaking the bank. Ask your employer to put $100(pre-tax) per week into your super account, and you’ll be paying just 15 per cent tax on that money, therefore giving your super a boost of $85 per week. In other words, it costs $67.50 per week of take home money, to save $85 for the future. If you earn a bit more, say $95,000, and can afford to take home $126 a week less, by salary sacrificing $200(pre-tax) a week, your super fund will be boosted by $170 a week after tax. And the benefits are clear, even for much small amounts. For example, if you earn $50,000, and can afford to take home $13.10 less per week, your super will be boosted by $884 per year.
| You earn | Before tax | After tax in your hand | After tax salary sacrificed | Tax you save per year with salary sacrificing |
|---|---|---|---|---|
| $50,000 | $20 | $13.10 | $17 | $202.80 |
| $60,000 | $100 | $67.50 | $85 | $910 |
| $90,000 | $200 | $126 | $170 | $2,288 |
To check your income tax bracket on the ATO website.
It is recommended to get any salary sacrifice agreements in writing with your employer and have it clearly state any salary sacrificed amounts on top of the super guarantee.
First Super commissioned The New Daily to research and write this article. The views expressed are of The New Daily.This publication was issued by First Super Pty Ltd (ABN 42 053 498 472, AFSL 223988), as Trustee of the First Super superannuation fund (ABN 56 286 625 181). It does not consider your personal circumstances and may not be relied on as financial advice. Content was accurate at the date of issue, but may subsequently change.