If you’re wondering how much of your salary you can sacriﬁce into super, you’ve come to the right place. We’ll break down the basics of salary sacriﬁcing into super and explain why it could be a smart move for your ﬁnancial future. So let’s get started!
What is Salary Sacriﬁcing?
Salary sacriﬁcing starts with deciding how much of your pre-tax salary you want to set aside in superannuation contributions each pay cycle. Any amount up to the maximum contribution limit for
that ﬁnancial year can be contributed this way. This means that by salary sacriﬁcing, you reduce your taxable income and also increase your retirement savings at the same time. It’s a win-win!
The Beneﬁts of Salary Sacriﬁcing
By making extra payments into your super fund from before tax income, these funds are then taxed at 15% instead of at your marginal rate – meaning more money in your pocket when it comes time to retire. By salary sacriﬁcing, you are essentially investing in yourself while deferring tax payments until later on down the line when you have access to tax concessions associated with super funds. Plus, any interest earned on these investments will not attract additional taxes either! And if that wasn’t enough reason to give it a go, employers may even contribute additional employer contributions as well – giving you double the gains.
Your concessional contributions cap is currently $25,000 per year (including both employer and employee contributions). However, if you are aged 49 or over as of June 30th 2020 then your concessional contributions cap increases to $50,000 per year or $100,000 over two consecutive years (from 1 July 2018 onwards). Once again this includes both employer and employee
contributions. Keep in mind that any amounts above these caps may be subject to additional taxes so it pays to be aware of how much you can comfortably contribute without going over these limits.
Salary sacriﬁce into superannuation is an effective way for many Australians who are looking for smarter ways to save for their retirement goals. By making extra payments from pre-tax income and reducing taxable income now, the long-term beneﬁts can be signiﬁcant when combined with
employer contributions and other tax advantages associated with super funds. With all that said, make sure that you know exactly how much money can be sacriﬁced into super each year so as not to exceed the caps set by law or risk drawing additional taxes later on down the line. With this
knowledge in hand, why not start exploring just what salary sacriﬁce could do for your ﬁnancial future today?