Is salary sacrificing on your mind?

2 min read

If you’ve been wanting to salary sacrifice for the 2022-23 financial year, here are some important points to consider.

Salary sacrifice is a great way to make before-tax (concessional) contributions into your super, provided your employer offers you this option. A salary sacrifice contribution is a contribution that is deducted from your total salary before income tax has been calculated which reduces your taxable income and could mean that you could pay less income tax.

If you want to salary sacrifice for the current financial year, it’s helpful to understand how much you can contribute. There’s a contribution limit that applies to all before-tax contributions—$27,500 for the 2022-23 financial year.

Counted within this limit is:

  • any employer super you receive (the current Superannuation Guarantee rate increased to 10.5% on 1 July 2022)
  • any salary sacrifice contributions,
  • any insurance premiums or administration fees that your employer pays on your behalf, and
  • personal contributions for which you want to claim a tax deduction.

If you are a defined benefit member, you may also have a notional contribution amount (calculated based on rules set out by the government) that is included within this limit.

This could mean the amount left over from your $27,500 limit to salary sacrifice might not be substantial. This is especially important, because any amounts that go over this limit will be taxed at your marginal tax rate, and you may have to pay an additional excess concessional contributions charge.

So, what are your options? Here’s two.

1. Make the most of the ‘carry forward’ unused cap rule.

If your total super balance was less than $500,000 as of 30 June 2022 and your total before-tax contributions were less than the cap in the 2018-19, 2019-20 or 2020-21 financial years, you can ‘carry forward’ the unused amounts of the cap to the 2022-23 financial year. In fact, any unused amounts from a previous financial year can be carried forward for five financial years.

Check how much you have in ‘unused amounts’ in your MyGov portal.

2. Consider making after-tax or non-concessional contributions.

These are super contributions deducted from your salary after your income tax has been deducted—provided you have not reached the transfer balance cap of $1.7 million.

You can make up to $110,000 in after-tax contributions each financial year and you may also be able to get a tax deduction for it too. However, going over this limit means attracting a tax rate of 47% (including the Medicare Levy).

Want to know more? Take a look at our Salary sacrifice vs after-tax contributions fact sheet.

Issued by Total Risk Management Pty Ltd ABN 62 008 644 353, AFSL 238790 (TRM) as trustee of Russell Investments Master Trust ABN 89 384 753 567. Nationwide Super and Resource Super are Divisions of the Russell Investments Master Trust. The Product Disclosure Statement (‘PDS’), the Target Market Determinations and the Financial Services Guide can be obtained by phoning 1800 555 667 or by visiting russellinvestments.com.au or for Nationwide Super by phoning 1800 025 241 or visiting nationwidesuper.com.au. Any potential investor should consider the latest PDS in deciding whether to acquire, or to continue to hold, an investment in any Russell Investments product. Russell Investments Financial Solutions Pty Ltd ABN 84 010 799 041, AFSL 229850 (RIFS) is the provider of MyTracker and the financial product advice provided by GoalTracker Plus. General financial product advice is provided by RIFS or Link Advice Pty Ltd (Link Advice) ABN 36 105 811 836, AFSL 258145. Limited personal financial product advice is provided by Link Advice with the exception of GoalTracker Plus advice, which is provided by RIFS.

This communication provides general information only and has not been prepared having regard to your objectives, financial situation or needs. Before making an investment decision, you need to consider whether this information is appropriate to your objectives, financial situation and needs. If you'd like personal advice, we can refer you to the appropriate person. This information has been compiled from sources considered to be reliable but is not guaranteed. Past performance is not a reliable indicator of future performance. To the extent permitted by law, no liability is accepted for any loss or damage as a result of reliance on this information. This material does not constitute professional advice or opinion and is not intended to be used as the basis for making an investment decision. This work is copyright 2022. Apart from any use permitted under the Copyright Act 1968, no part may be reproduced by any process, nor may any other exclusive right be exercised, without the permission of Russell Investments.