You’ve probably heard someone talking about ‘salary sacrifice’ at your family barbeque. But what does it actually mean? And why would you want to do it?
What is it?
If you earn more than $37,000, salary sacrifice can be a good way to grow your super and while saving on tax. It involves giving up some of your take-home pay and putting it into your super fund instead.
To salary sacrifice, you and your employer agree to redirect a portion of your pay as a contribution to super. By ‘sacrificing’ some of your pre-tax salary and putting it into your super fund, you get taxed at a fixed rate that’s usually less than income tax. That’s why it’s also known as ‘concessional contributions’ because there are tax concessions with these types of contributions.
Setting up salary sacrificing
If you want to sacrifice some of your salary to super you should enter into a formal agreement with your employer. It is best to include the details in your terms of employment. This ensures your employer calculates their super guarantee contribution on your original salary.
So why would you salary sacrifice?
It comes down to two things:
Simple as that!
Donna has over 17 years experiance in the financial industry and is practised in all facets of financial planning, including retirement, wealth creation, gearing, superannuation and risk insurance.
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