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.
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