Salary sacrifice - build wealth and reduce tax
Salary sacrificing into your superannuation account can be a convenient and effective way to save, while reducing the amount of tax you pay each year.
Generally, the higher your total assessable income, the greater the tax advantage of salary sacrificing will be. It is therefore best suited to those who earn at least $37,001 per annum and have a marginal tax rate of 30% or more. Low and middle income earners, such as people employed part time or on a casual basis, may like to consider the Government co-contribution initiative.
How does a salary sacrifice strategy work?
- You ask your employer to pay a selected amount or percentage of your before-tax income into your VicSuper account (which generally involves completing a form). This is on top of the compulsory 9% Superannuation Guarantee amount which your employer currently pays.
- Your super fund deducts tax at the rate of 15%, not your marginal tax rate.
- Your annual taxable income will reduce as more before-tax income is paid into super - lowering the amount of tax you pay.
Only future income can be salary sacrificed. This may include regular salary, bonuses and allowances. Many VicSuper members have chosen to salary sacrifice a small amount of before-tax income into their super account each pay period. This steadily builds their retirement savings, is tax effective, and is likely to fall well under the lower contribution limits now in place.
To learn more, use our request form to have a Your guide to salary sacrifice and the Government co-contribution brochure sent to you.
Start early for best results
Often people wait until just before retirement to top-up their super. Not only does this risk leaving a potential savings shortfall, but contribution limits now restrict the amount of money which people can add to super each year at the low tax rate of 15%.
So to maximise your retirement benefit, start salary sacrificing sooner, if possible. With the effect of compounding - earning investment returns on your investment returns - this long-term strategy can really pay off.
How much can I salary sacrifice?
To help decide what amount you wish to contribute each pay period, use VicSuper's calculator.
What could I add to my final super benefit?
To view the potential increase in your final retirement benefit, use VicSuper's calculator.
Don't wait - start next pay period!
Complete and sign a Make personal and/or salary sacrifice contributions through your employer form, and provide it to your human resources or payroll manager, or to a third party specified by your employer. They'll initiate deductions from your salary, and pay contributions into your VicSuper account.
I'm a school based staff member or principal employed by DEECD
Your salary sacrifice arrangement must be made through SmartSalary. Therefore, to start salary sacrificing into your VicSuper account, use SmartSalary's Salary Packaging Application Form, rather than VicSuper's form. If you would like to change your existing salary sacrifice arrangement, use SmartSalary's Additional Superannuation Application Form.