Salary Sacrifice

There are significant superannuation regulation changes that may affect your contribution decisions:

The total super balance (TSB) threshold increases from $1.7 million to $1.9 million after 1 July 2023. It affects your eligibility for non-concessional/spouse/co-contributions.
The SGC rate increases from 10% to 10.5% in the 2023 FY and to 11% in the 2024 FY.
The work test requirement no longer applies if you make non-concessional/salary sacrifice contributions after 1 July 2022.
The age restriction for the bring-forward measure extends from under 67 to under 75 after 1 July 2022.
Income thresholds for the co-contribution measure increases annually.

We are currently updating the contents on our website progressively to reflect the above changes. In the meantime, please be mindful of the changes when making contribution decisions.

What is Salary Sacrifice?

Your Employer is legally obliged to contribute superannuation for you into a Complying Superfund which includes an SMSF. The amount your Employer must contribute is equal to 10% of your salary. In addition to the contributions your Employer makes on your behalf, you have the option of "salary sacrificing" additional super contributions if you choose so. Salary sacrificing describes the arrangement of entering into an agreement with your Employer to pay part of your pre-tax salary directly into your SMSF. This means that your total remuneration needs to be renegotiated with your Employer where you agree to a reduced salary in return for additional superannuation contributions.

Tax Rate

The salary sacrificing contributions made to your SMSF are not taxed in your personal name but in the SMSF at 15%.

Example:

Assume you are on the highest marginal tax rate of 45% and you salary sacrifice $10,000. The amount sacrificed of $10,000 will not be taxed in your name saving you $4,500. It is however taxed in the name of your SMSF at 15% resulting in a tax liability to your SMSF of $1,500. This is a net tax benefit to you of $3,000. It is important to note however that the tax benefit you receive is the difference between your tax rate and the SMSF tax rate of 15%. Accordingly the higher your personal tax rate the better the tax savings associated with salary sacrificing.

Maximum amount that can be Salary Sacrificed

Salary Sacrifice Contributions are Concessional Contributions (see here for more on Concessional Contributions). The Maximum amount you can Salary Sacrifice (including your Superannuation Guarantee Entitlements) is as follows:

Income Year	Concessional Contributions Cap per member per annum
2021-22	$27,500
2020-21	$25,000
2019-20	$25,000

Example:

Barney is 45 and on an annual salary of $100,000 and receives 10% in compulsory Superannuation Guarantee Entitlements (i.e. $10,000). Given the maximum Concessional Contribution for the 2021/2022 Financial Year is $27,500 the maximum Barney can Salary Sacrifice is $17,500 made up of his Superannuation Guarantee Entitlements of $10,000 and the maximum Salary Sacrifice Amount of $17,500.

Salary Sacrifice - There is a downside

Generally, you must reach preservation age before you can access your super benefit. For more information on accessing your super benefit, please click here. So whilst it may be tax advantageous to salary sacrifice, you must ensure that it is money you will not require until you are eligible to access your super benefit.

Salary Sacrifice Arrangement

For more on Salary Sacrifice, including a Salary Sacrifice Arrangement incorporating a TRIS, please click here.

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General Advice Warning

No Advice Express or Implied: The contents of this website are of a general nature only and have not been prepared to take into account any particular investor's objectives, financial situation or particular needs. ESUPERFUND does not provide financial product advice or recommend any financial products either expressly or implied. ESUPERFUND expressly states that it does not recommend, represent as suitable, or endorse any financial product or service available through ESUPERFUND. This applies equally to those financial products which are established for your SMSF when you become a client of ESUPERFUND. Any information provided in relation to any financial product or service available through ESUPERFUND is factual information only about the operation of the account and how data is made available to ESUPERFUND. Where this website refers to a particular financial product then you should obtain a Product Disclosure Statement (PDS) relating to that product and consider the PDS before making any decision about whether to acquire the product. We also recommend that you should seek professional advice (see below) from a financial adviser before making any decision to purchase any financial product referred to on this website. While the sources for the material are considered reliable, responsibility is not accepted for any inaccuracies, errors or omissions.

Seek Professional Advice from a Financial Adviser: ESUPERFUND is a no advice model and does not provide financial, legal or tax advice to clients. We recommend that you seek appropriate professional advice in view of your personal circumstances. A licensed financial adviser will consider your personal situation and make a recommendation suitable to your financial needs. All information detailed on our website is purely factual and is general in nature. Accordingly, you should not rely on it. It should always be remembered that Trustees are legally responsible for all the decisions made even if you obtain advice from a Financial Planner. Whilst a Financial Professional can provide advice and assistance you are ultimately responsible for the Fund.

Fees: Fees relating to operating your SMSF with ESUPERFUND are detailed on our fee page here. When setting up a SMSF it is important to understand that additional fees may apply that must be carefully considered prior to making a decision to setup a SMSF including an ATO Supervisory Levy, Company Trustee Setup Fee (where applicable), and Investment Fees.