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Super Plus
Salary sacrifice - Add More to Your Super
Salary sacrificing into super means foregoing a portion of your gross wage or salary as an extra contribution into your super, which in most cases is contributed on top of the Super Guarantee (SG) contributions you receive from your employer. It’s one of the easiest ways to save on tax and grow your super balance at the same time - without significantly changing your current lifestyle.
Learn the basics of salary sacrificing in three easy steps:
1.Benefits of salary sacrificing
While salary sacrificing can reduce your take-home salary, it can reduce the amount of tax you pay. Salary sacrifice contributions to your super are only taxed at 15% on the salary sacrifice amount. So if your income tax rate is higher than 15%, salary sacrificing can be a good way to reduce the amount of tax you pay whilst growing your superannuation.
Salary sacrificing can also reduce your taxable income for that financial year. The amount you sacrifice is not included as assessable income for income tax purposes. In addition to the tax benefits, salary sacrificing into super is a great way to boost your retirement savings. Together with time and the power of compounding returns, salary sacrifice contributions can have a significant impact on your end super balance - even if the amount you contribute is small.
2. Are there limits to salary sacrificing into super?
In short, yes, there are limits to salary sacrificing into super if you want to avoid penalty tax. Salary sacrifice contributions, along with SG contributions made by your employer or personal contributions for which a tax deduction can be claimed, are pre-tax contributions which are considered ‘concessional’ super contributions. This means they are only taxed at the 15% concessional tax rate.
There are limits on the total amount of concessional contributions that are eligible to receive the concessional tax rate within one financial year. Amounts above that limit will be taxed at the highest marginal tax rates.
See the limit that applies to your age group below.
If you’re under 50 years old
From 1 July 2007, the cap on concessional super contributions to super is $50,000p.a. for those under 50. So, the sum of all concessional contributions such as SG and salary sacrifice contributions of up to $50,000 per year will receive the concessional 15% tax on entry.
It’s important to know that the amount of pre-tax contributions exceeding the cap of $50,000 will be taxed at the highest income tax rate (45 cents in the dollar for financial year 2007/2008) plus the Medicare levy of 1.5% i.e. 46.5% in total.
If you have more than one super fund, the sum of concessional contributions into all these super funds counts towards this cap, so you cannot increase your limit by having more than one super fund.
If you’re 50 years and over
For those 50 years and over, the cap on all concessional super contributions is $100,000p.a. until 30 June 2012 - after which it will revert to $50,000 plus an amount for wage indexation. This means up to $100,000 per year in SG, salary sacrifice and personal contributions (for which a tax deduction can be claimed) can be contributed and receive the concessional tax rate of just 15%.
Any concessional contributions exceeding the cap will be taxed at the highest marginal income tax rate plus the Medicare levy of 1.5%. In the 2007/2008 financial year, the highest marginal income tax rate is 45 cents in the dollar.
As the $100,000 cap will be reduced to $50,000 per year (indexed) for all Australians regardless of age in July 2012, there is a window of opportunity to contribute large amounts to super while you can still receive the 15% tax rate.
If you have multiple super funds, this cap applies to all concessional contributions made to all your super accounts.
65 years and over and still working?
You need to work at least 40 hours in 30 consecutive days to be able to contribute to super
About the Author
BT Financial Group is dedicated to offering investors advice and investment education about superannuation and how to manage your taxable income for a better retirement.
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The Super Lotto Plus game consists of a player picking 5 different numbers from 1to47 & a mega # from 1 to 27?
(the mega # does not to be different from the other numbers) (a) Find the probability that none of the five numbers match and the mega number doesn't match. (b) Find the probability that three of the five numbers match and the mega number matches.
a)
initially there are 47 numbers. and 47-5 are left free, so the first number has 42 possibilities. the second now 41,... so
to know how many chances of 0 matches are 42*41*40*39*38
i will suppose the mega is from a different set of 1-27 numbers, so there are 26 free
P(A) = 42*41*40*39*38*26 / (47*46*45*44*43*27)
= .53
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