Want to supercharge your super? Salary sacrifice is an easy and methodical way to build up your funds. It can also come with some tax advantages as we'll show you in this story.

Give me the main points

  • Salary sacrifice lets you put some of your pre-tax salary into your super account.
  • This may lower your taxable income.
  • Another tax advantage: you get a capped tax rate of 15% on the 'sacrificed' income.¹
  • It's straightforward - super easy - to set up with your employer.

Imagine a way to put extra money into your super before your salary hits your bank account, before you spend it on something you maybe didn’t need: a way to bring your taxable income down, so you pay less tax and can save a chunk of money in the process. It’s called salary sacrifice, and if you haven’t explored the benefits of the scheme, here’s a quick overview of how it works.

Small sacrifices can end up in big savings.

Salary sacrifice lets you put extra money into your super fund account before tax. This can lower your taxable income, so you pay less tax and can save more for retirement.

Let's say you have an income of $60,000 and you chose to salary sacrifice $10,000 over the course of the year. Your taxable income would drop to $50,000. This means you’d pay around $8,547 in tax instead of $12,147.² Salary sacrifice isn't for everyone though, and is more effective if you earn more than $37,000.³

Get set up for the future.

Setting up salary sacrifice is normally a straightforward process: you’ll just need to arrange with your employer to have them pay some of your pre-tax income straight into your super fund, which you can access when you retire. The benefits of contributing extra to your super from your pre-tax pay include easier budgeting as the money never goes into your bank account so you won't miss it and you can get a capped tax rate of 15%¹ on the 'sacrificed' income.

If you're serious about getting your super up to speed, then depending on your circumstances, salary sacrifice is an effective strategy to maximise your super contributions and lower your taxable income at the same time. Your take-home pay will cover today, your sacrificed salary will help fund tomorrow.

You should consider whether the salary amount sacrificed will attract an additional 15% tax – broadly, this occurs when you have income and concessional super contributions of more than $300,000 in the 2016/17 financial year.

To size-up your savings and set up salary sacrifice, contact your employer. Simply choose one of the options below and we’ll get started. Not an MLC member? Take a moment to explore these easy steps you can take to join one of Australia’s largest retail superannuation providers.

¹ If you have income and concessional super contributions of more than $300,000 in the 2016/17 financial year, the salary amount sacrificed may attract an additional 15% tax. It was proposed in the 2016 Federal Budget the income threshold will be lowered $250,000 in the 2017/18 financial year and onwards.

² ATO 2016, found at: https://www.ato.gov.au/printfriendly.aspx?url=/Business/Super-for-employers/In-detail/Salary-sacrifice/Salary-sacrificing-super---information-for-employers/. These figures are based on ATO Comprehensive tax calculator 2015 for the 2014-15 income year, calculated by applying 15% income tax, the Medicare levy and the low income tax offset.

³ Money Smart 2016, found at: https://www.moneysmart.gov.au/superannuation-and-retirement/how-super-works/super-contributions/contributing-extra-to-super

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