Salary packaging (also known as salary sacrificing) can help boost your superannuation savings and may reduce the amount of tax you pay as well.
To encourage Australians to save more for their retirement, superannuation has a concessional rate of tax. Contributions to, and earnings within, super are taxed at up to just 15 per cent. For most Australians, this rate is much lower than the marginal rate of tax that applies to investments outside super as illustrated in the table below.
As a result of the tax concessions that apply to super contributions, there are limits on the level of contributions you can make. Concessional contributions (those contributions only attracting 15 per cent tax) include your employer’s superannuation guarantee contributions as well as any salary sacrifice contributions you choose to make, and are limited to $30,000 per person per year for those aged less than 50. The concessional contribution cap is $35,000 for those aged 50 or over. For low income earners with an adjusted taxable income of up to $37,000 you may be eligible for the low income superannuation contribution (LISC) from the Government. The LISC refunds the 15 per cent contributions tax you pay on your SG contributions and is paid on any salary sacrifice contributions you make.
How much tax can salary sacrificing save you?
| Taxable income + on benefits | Marginal tax rate | Super tax rate | Net tax saving contribution |
| $0 to $18,200 | 0% | 15% | Negative |
| $18,201 to $37,000 | 21% | 15% | 6% |
| $37,001 to $80,000 | 34.5%; | 15% | 19.5% |
| $80,001 to $180,000 | 39% | 15% | 24% |
| $180,001 to $300,000 | 49% | 15% | 34% |
| Over $300,001 | 49% | 30% | 19% |
Please contact Matthew to discuss salary sacrifice in more detail. Matthew Grapsas and LBW Financial Planning Pty Ltd are Authorised Representatives of Lonsdale Financial Group Ltd ABN 76 006 637 225 AFSL 246934.
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