Salary Sacrifice

Not to be confused with special salary packaging provisions available to employees of  'Not for Profit' and 'Charitable' organisations, this is one of the most cost effective methods of building your retirement wealth if your marginal tax rate is 30% or above.

By coming to an arrangement with your employer to deduct pre-tax money from your pay and send this directly to your super fund, every $100 of 'take home pay' you forfeit means $145.99 is sent to your super fund.  This assumes you pay Medicare levy and your marginal tax rate is 30%.

Because your employer is able to claim a tax deduction for this payment, your superannuation fund manager is obliged to deduct 15% of the amount paid (contributions tax) and forward it to the Government.  This means that making a salary sacrifice of $100 provides $124.09 to your superannuation fund.  Effectively, for every $100 you 'sacrifice' from your take home pay, that amount plus another $24.09 (after tax) is sent to your super fund.

Remember:  Salary sacrificed contributions cannot be used to obtain the Government's co-contribution to super and caps apply as to how much you are allowed to contribute to super. See the Contributions Caps section of this site for details.