If you are employed, then ‘salary sacrifice’ is an arrangement you can enter into with your employer. You forego part of your salary in return for your employer contributing additional funds into your superannuation fund.

Benefits of salary sacrifice to super

Compared to other salary sacrifice arrangements such as a car lease, superannuation is exempt from Fringe Benefits Tax.

Salary sacrifice amounts reduce your assessable income for tax purposes (i.e. it is deducted from your ‘before tax’ wages).  This will save you income tax that would have been payable if the additional salary was drawn as a wage.  The amount saved will depend on your marginal tax rate, which could be as high as 47%.

Salary sacrificed superannuation contributions are concessionally taxed in the super fund at a flat rate of 15%.  Generally this tax is less than the tax you would have paid had you not entered into the arrangement.

However, you are subject to certain caps on the amount you can salary sacrifice to super.

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