Salary sacrifice
VicSuper can accept salary sacrifice contributions on behalf of VicSuper Scheme and VicSuper Beneficiary Account members.
Salary sacrificing into super involves paying some of your pre-tax salary into super through your employer. It can lower your taxable income and increase the net value of your combined income and super.
Salary sacrificing into super is one of the most efficient ways to build your retirement savings.
Please note, limits apply to the amount of concessional contributions (including salary sacrifice) which can be contributed into super at the concessional tax rate of 15%. Concessional contributions in excess of the limit will be taxed at the highest marginal tax rate plus Medicare levy, and will be counted towards the non-concessional limit.
Tax benefits
1. You may lower your taxable income
More of your salary is paid into super (before personal income tax is deducted) instead of being taxed as income.
2. Concessional tax rates on contributions
Salary sacrifice contributions (up to the concessional contributions limit) incur 15% tax on entry, and may be subject to lump sum tax on withdrawal. This may be considerably less than the current marginal tax rate of up to 46.5% (including the Medicare levy) you could pay if you took this money as salary.
However, if your super fund does not have your tax file number (TFN) the fund must tax all concessional contributions (eg salary sacrifice and superannuation guarantee) at the top marginal tax rate plus Medicare levy.
3. Concessional tax rates on investment returns
You pay a maximum of up to 15% tax on your investment returns in super. Other investments are generally taxed at your marginal tax rate (as high as 46.5% including the Medicare levy).
What you can salary sacrifice
Types of contributions you can salary sacrifice include:
- your regular salary
- any bonuses you may receive from your employer
- any allowances you may receive from your employer.
An agreement to salary sacrifice these amounts must be in place with your employer before you become entitled to them.
How to start
- Check that your employer allows you to salary sacrifice.
- Decide how much you would like to contribute.
- Set up an agreement with your employer before you become entitled to the amount you want to salary sacrifice. You should discuss:
- the amount of salary you want to sacrifice
- where the contribution is going to come from (your regular salary, bonuses or allowances)
- if your employer's Superannuation Guarantee (SG) obligations will be calculated on your pre or post-sacrificed salary - whether your pre-sacrificed salary will be used to calculate any defined benefit fund entitlement you may have.
- You need to be a member of VicSuper Scheme or VicSuper Beneficiary Account.
- Once you're a member, check with your human resources or payroll manager to find out their salary sacrifice process. They will either ask you to complete a
Make a personal and/or salary sacrifice contribution through your employe (V302) form or to fill out your employer's equivalent form. - Give your completed form to your employer or third parties as instructed by your employer, not VicSuper. They'll initiate deductions from your pay and automatically send your contributions to VicSuper.
Need more information?
Download VicSuper's Your guide to salary sacrifice and the Government co-contribution (V2009). This guide explains how to build your super via a salary sacrifice arrangement, and how to take advantage of the Government co-contribution initiative.
If you would like a copy sent to you, complete our online request form or call our Member Centre on 1300 366 216.
