Boost your super through salary sacrifice

Salary sacrifice can be a really clever way for employees to contribute extra money to super. Read on below to find out how it works and why it can be so effective.


You ask your employer to allocate a portion of your gross wage or salary as an extra contribution to your super. While personal super contributions come out of your after-tax salary (ie. after you have paid tax at marginal tax rates), salary sacrifice contributions come out of your pre-tax salary and are only taxed at 15% (up to certain limits – see contributions caps below). So if your marginal income tax rate is higher than 15%, salary sacrificing may significantly reduce the tax you pay, and put more money to work in your super account. 

 

The Government has set caps on the amount of money you can add to super each year on a concessionally taxed basis. In addition, the Government has set a non-concessional contributions cap. Salary sacrifice contributions count towards your concessional contributions cap, as do any super contributions made for you by your employer. For 2017/18 your concessional contributions cap is $25,000. It’s important to take care not to exceed your contributions caps as contributions above these caps may be subject to additional taxes and charges.

The ASFA Retirement Standard indicates that for a comfortable retirement lifestyle*, a single person would need to spend about $43,538 per annum, and a couple would need to spend about $59,808 per annum.

Others suggest that a retirement income of 65% of your current salary is ideal. The level of retirement income you will need depends on your specific circumstances and the type of lifestyle you want.

 

To see how you’re tracking, check out our Retirement Income Calculator and put in your own numbers to get a better idea of where you might be by the time you retire. You can also see how adding extra money to your super can affect your balance.


Only future salary can be salary sacrificed to super, meaning you can’t sacrifice an amount that you’re already entitled to for previous work completed, such as accrued leave payments.


There is no limit to the amount that you can salary sacrifice to your super account. However, there are limits (caps) to the amount you can add to super each year on a concessionally taxed basis. Amounts contributed above these caps may be subject to additional taxes and charges.

 

See contribution caps above or visit ato.gov.au and search ‘super contributions’ or speak to your financial adviser to learn more about these limits.

 

In addition, an industrial award or employment agreement could also require you to receive a minimum salary or wage as cash in hand, potentially limiting the amount you can salary sacrifice to your super.


To arrange salary sacrifice:

  1. Check with your employer to see if they offer salary sacrifice arrangements (not all employers do).
  2. Decide how much of your before-tax salary or wages you would like to sacrifice to super, considering what you can afford and your contributions caps (see above).
  3. Check with your employer if your proposed salary sacrifice arrangement will impact on any benefits you receive (e.g. leave loading) and whether the Super Guarantee (SG) contributions your employer makes for you will be reduced when your before-tax salary decreases because of your salary sacrifice request.
  4. Complete the appropriate form from your HR department or Payroll Officer so that they can start making salary directly to your BT super account.

Disclaimer and notes

* ASFA Retirement Standard:
The amount required to fund a comfortable lifestyle has been sourced from The Association of Superannuation Funds Australia Limited (ASFA) Retirement Standard (December 2016), and assumes that the retiree(s) own their own home outright and are relatively healthy. The figures relate to expenditure by the household. Single calculations are based on female figures. Please refer to the ASFA Retirement Standard for further information, available at www.superannuation.asn.au.

BT's Retirement Income Calculator

Explore small changes that can make a difference in retirement

Start now

Boost your super

Learn how to build your super

Read now

Speak to a BT Consultant

If you have any questions about your super.

Call us on 132 135