STRATEGY – Salary Sacrifice and How it Works


Salary Sacrifice and How it Works

Salary Sacrifice
and How it Works

While there is a sacrifice or reduction in take home salary, the important part of salary sacrifice is the saving for retirement and the added bonus of a lower-taxed environment. The tax is 15%, where-as tax on income over $18,201 is now taxed at 19% and higher as your total income for the year increases, up to 45% plus the Medicare levy.

Watch the concessional-contribution caps, which are ones where they are claimed as a tax deduction (eg an employer) as concessional contributions include salary sacrifice. The current cap 2012-2013 is $25,000, or $50,000 for people over 55. See ATO site.

Let’s illustrate the calculations

Taxable       Marginal      Salary           Marginal        Tax (@15%)     Net Tax
Income        Tax Rate       Sacrifice       Tax                    if  in Super
$15,000          0%                   $5000              $0                         $750                     $750 paid
$20,000         19%                 $5000              $950                     $750                     $200 saved
$85,000         37%                 $5000              $1850                   $750                     $1100 saved

If your taxable income is less than $18,000 then non-concessional (personal, after tax) contributions and the Government Co-Contribution as better than salary sacrifice. Sometimes a combined salary sacrifice and personal contribution may have advantages.

Calculators for Salary Sacrifice and Govt Co-Contribution can be found on the Vic Super website HERE, or the ATO, as well as other sites.



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