What is Salary Sacrifice
Salary Sacrifice Contributions are made by your Employer on instructions from you. Salary Sacrifice Contributions are voluntary superannuation contributions made by an Employer to your SMSF over and above their Superannuation Guarantee or award obligations. These contributions are made to your SMSF instead of to you as an Employee receiving that amount as salary.
With salary sacrificing, the contributions made into your SMSF are not taxed in your personal name but in the SMSF at 15%. So if your personal tax rate is more than 15% there is a tax advantage in salary sacrificing. If you are on the top marginal tax rate of 47% you can save up to 32% on each dollar you salary sacrifice into super.
Watch your Contribution Limits
The Concessional Contribution limit applicable for a given Financial Year is as follows. The limits apply to the total of your Super Guarantee, Salary Sacrifice and Personal Concessional Contributions where a tax deduction is claimed.
||Concessional Contributions Cap per member per annum
TRIS & Salary Sacrifice after age 60
After the age of 60, implementing a TRIS in combination with Salary Sacrifice can create possible tax savings because all pension payments are tax free after 60. The tax saving benefits accrue on two levels. The first is that you pay less tax on the salary you sacrifice. The second is that there is no tax payable on the TRIS you draw from the SMSF. You should obtain your own independent financial and taxation advice about which course of action is appropriate to your circumstances.
TRIS & Salary Sacrifice under 60
Commencing a TRIS in combination with Salary Sacrifice may be a worthwhile financial exercise producing tax savings if you are aged between Preservation Age and 59 as you pay less tax on the salary you sacrifice. However offsetting this tax gains is the tax that you pay on the TRIS you draw from the SMSF (which we note is concessionally taxed and receives a 15% "Pension Rebate"). You should obtain your own independent financial and taxation advice about which course of action is appropriate to your circumstances.
TRIS & 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. By commencing a TRIS, you can access your super benefit as pension withdrawals from the SMSF. However, a maximum annual pension drawdown of 10% applies for a TRIS. So whilst it may be tax advantageous to salary sacrifice, you must ensure that it is money you will not require until you are able to access it.
To demonstrate the benefits of commencing a TRIS and Salary Sacrifice, click here to view a Case Study.
To establish a TRIS, please submit an Online Application Form here.
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