Are you considering forgoing part of your salary and having it paid into your superannuation fund instead?
Salary sacrificing to superannuation has some tax benefits as you’re putting a portion of your income into your fund before you pay tax on it. You’ll still pay tax on that portion going into super – but it’s at a much lower rate.
For those with a larger income, there is the potential for bigger savings.
However, in a few years’ salary sacrificing to super won’t be as beneficial as it is now due to upcoming income tax changes. We explain more about this later in the blog. Or you can watch the video here:
It’s important to note that this strategy isn’t suitable for everyone. So, if you need personalised help or you’ve got queries about salary sacrificing and its benefits, please reach out to our Certified Financial Planner® at Precision Wealth Management.
Salary Sacrificing to Superannuation: Why it’s more beneficial now
Many Australians fall into two marginal tax rates – those are 32.5 per cent and 37 per cent.
- Tax rate of 32.5% for taxable income between $45,000 to $120,000
- Tax rate of 37% for income between $120,000 – $180,000
Employees who salary sacrifice to superannuation should experience some tax savings.
So, rather than paying income tax at your marginal tax rate, you can sacrifice some of that income to superannuation where you pay tax at 15%.
That means that that portion of income that you put into super is taxed at the rate of 15 per cent – rather than 32.5 per cent or 37 per cent (depending on your income). You are taxed at a lower rate on the sacrificed portion as it decreases your taxable income. Decreasing your taxable income can also reduce your Medicare levy or Medicare levy surcharge, or increase other benefits such as the low and middle income tax offset.
Upcoming Income Tax Rate Changes
In a couple of years, salary sacrificing to superannuation won’t be as financially beneficial for people in these income brackets.
That’s because from July 1, 2024 the marginal tax rate for people earning between $45,001 and $200,000 is dropping to 30 per cent. That means the savings won’t be as significant.
Find out more about the income tax changes on the ATO website here.
If you need personalised help and a wealth creation strategy, our Certified Financial Planner® at Precision Wealth Management is ready to assist.
Precision Wealth Management is a local, privately-owned financial planning firm based on Brisbane’s northside.
Our certified advisors work with each individual client to determine the best wealth creation strategy based on their unique situation.
We strive to stay at the forefront of the industry, and our investment approach is based on decades of research.
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Our services include Superannuation Advice And Planning, personal Insurance Advice, Budgeting And Cashflow Management, Investment Strategy And Advice, Aged Care Financial Advice, Retirement Planning Advice, and Debt Reduction Financial Planning.
At Precision Wealth Management, we offer flat fee pricing which is determined on the complexity of the work – not the value of your investments.