Contributing to Superannuation

Salary Sacrifice

Salary sacrifice (often included as part of your salary packaging) occurs when you, as an employee, agree to forgo an amount of your salary pre-tax in return for an equal amount to be contributed to your super by your employer. 

The reduction to your gross salary (salary before tax), is the amount salary sacrificed.

The salary sacrifice contribution attracts the 15% contributions tax when it goes into super, instead of your marginal tax rate. For people on very high incomes (over $250,000) this tax has been increased to 30% on the portion of contributions that take income over $250,000. For people on low incomes (under $37,000) the first $500 of this tax will be refunded back into their account via the Low Income Superannuation Tax Offset.

How much you can salary sacrifice is limited by contribution caps which we will discuss later. If you put in too much, tax penalties will apply. Up to 85% of excess concessional contributions can be withdrawn and it will be taxed at your marginal rate (less the 15% tax already deducted) plus penalties. If you dn’t withdraw the excess concessional contribution, it will count towards your non-concessional contributions cap.