• Salary sacrificing super

    Salary sacrifice is an arrangement with your employer to forego part of your salary or wages in return for your employer providing benefits of a similar value.

    If you make voluntary super contributions through a salary sacrifice agreement you should be aware of how your contributions will affect your super balance. You can agree with your employer for your voluntary contribution to be in addition to your employer’s compulsory super contribution.

    If you are deciding whether you should salary sacrifice some of your income into your super or you are already salary sacrificing, you may want to find more information or check your entitlements under the Fair Work Act 2009.

    One example of a salary sacrifice arrangement is to have some of your salary or wages paid into your super fund instead of to you.

    Salary sacrificed super contributions are classified as employer super contributions, rather than employee contributions. This reduces the amount of super guarantee contributions that your employer is required to make for you, unless the terms of the agreement between you and your employer specify that they continue to pay the minimum super guarantee amount. If you make super contributions through a salary sacrifice agreement, these contributions are taxed in the super fund at a maximum rate of 15%. Generally, this tax rate is less than your marginal tax rate.

    The sacrificed component of your total salary package is not counted as assessable income for tax purposes. This means that it is not subject to pay as you go (PAYG) withholding tax.

    If salary sacrificed super contributions are made to a complying super fund, the sacrificed amount is not considered a fringe benefit.

    The Fair Work Commission regulates employment agreements and conditions. To check your conditions contact Fair Work CommissionExternal Link.

    The Fair Work Ombudsman has information on deducting pay & overpaymentsExternal Link. You can contact the Fair Work Ombudsman on 13 13 94.

    See also:

    Salary sacrifice limitations

    If there are no limitations specified in the terms of your employment, there is no limit to the amount you can salary sacrifice. However, you should also consider whether the:

    • additional salary you wish to sacrifice will cause you to exceed your concessional (before-tax) contributions cap and attract additional tax – this cap limits the amounts that can be contributed to your super fund and still receive the concessional tax rate of 15%
    • salary amount you sacrifice will attract Division 293 tax – this occurs when you have an income and concessional super contributions of more than
      • $300,000 in one year, before 1 July 2017
      • $250,000 in one year, from 1 July 2017.

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    Last modified: 23 Jun 2017QC 23227