Salary-Sacrifice-Factsheet

SALARY SACRIFICE
Looking for a way to boost your super balance and reduce your tax? Salary sacri˜ce could

be the way to go. Here’s what you need to know.
WHAT IS SALARY SACRIFICE?
It™s an easy and convenient way of contributing extra to your
super each pay cycle by fisacri˜cingfl part of your salary.

Your employer makes these contributions on your behalf, on
top of the super guarantee (SG) they already pay.
Super account
Taxed at 15%
Bank account
Taxed at marginal rate
Salary
Salary sacri˜ce

contributions
Remaining
salary
HOW IT WORKS
THE BENEFITS OF SALARY SACRIFICE
You could save on tax
By sacri˜cing part of your salary, you™re reducing your take-
home pay and therefore the amount of income tax you pay.

Plus, super contributions are taxed at only 15%, which is
likely to be lower than your income tax rate.
You™re looking after future you
Even small contributions to super can make a big difference
thanks to the power of compound interest. Not only can you
earn interest on any returns your super makes, you also earn
interest on that interest Πand so on. Over time, this can help
your balance grow signi˜cantly.
CASE STUDY˜ MATT BOOSTS HIS SUPER BY SALARY SACRIFICING
Matt earns $65,000 before tax, excluding his employer’s super guarantee contribution. If Matt decides to redirect $5,000

of his pay into salary sacri˜ce super contributions, he will save $1,050 in tax, with the extra money going into his super fund.
Matt’s income
Without salary sacri˚ce
With salary sacri˚ce
Gross salary
$65,000
$65,000
Le ss
salary sacri˜ce to super
$0
$5,000
Le ss
tax + Medicare levy
$11,787
$9,987
Take-home (net) pay
$53,213
$50,013
Matt’s super
Employer super contribution
$6,500
$6,500
Plus
salary sacri˜ce
$0
$5,000
Le ss
contributions tax
$975
$1,725
Net super contribution
$5,525
$9,775
Assumptions: The ˜gures used in this table are estimates only and are based on 2021/22 income tax rates and a Medicare Levy of 2%. Employer super
contributions remain the same after salary sacri˜ce.
In this scenario, Matt’s take-home pay will drop by $3,200, he will save $1,800 in tax on income and he will have an

extra $4,250 in his super account.
Overall, Matt will pay
$1,050
less tax by using salary sacri˜ce:
Matt’s income
Without salary sacri˚ce
With salary sacri˚ce
Income tax
$11,787
$9,987
Contributions tax*
$975
$1,725
Total tax payable
$12,762
$11,712
Tax saving
$1,050
*The amount of contributions tax shown above is a nominal amount based on 15% of your concessional contributions.

WHAT ELSE SHOULD YOU KNOW ABOUT

SALARY SACRIFICE?
It™s not right for everyone
If you™re earning less than $45,000 per year, salary sacri˜ce
may not be right for you. That™s because the difference
between the 15% tax on super contributions and your income
tax rate shrinks to just a few percent. So you™ll be reducing
your take-home pay without bene˜ting from any tax savings.
There may be a better option for you, such as the
Government Co-contribution. To see if you’re eligible

go to
˚rstsuper.com.au/co-contribution
.
Contribution caps apply
You can only contribute $27,500^ to super before tax each
˜nancial year. This includes salary sacri˜ce, SG contributions
and personal tax-deductible contributions. Check your
transactions anytime in your ˜rstonline account by going

to
˚rstsuper.com.au/login
.
Workplace and tax rules may affect you

>
Not every workplace allows salary sacri˜ce. If you can™t
contribute this way, personal tax-deductible contributions
may be another option.

>
As salary sacri˜cing effectively lowers your take-home pay,
some employers may want to reduce your bene˜ts (such
as holiday loading and overtime) proportionally. Make sure
you reach an agreement where your bene˜ts are calculated
based on your original salary.

>
As your employer is making these contributions for you,
you can™t claim deductions or tax offsets for salary sacri˜ce
amounts. Nor do these amounts count as fringe bene˜ts.
SALARY SACRIFICE ˜ PAGE 2
^As at July 2021.
FREQUENTLY ASKED QUESTIONS
Does my employer still have to pay SG?
Yes. As long as you qualify for super your employer
must pay at least 10% (the current SG rate)^ towards
your super, regardless of any other arrangement you
have in place.
How much should I contribute?
This comes down to how much you can spare from
your salaryand what level of contribution will be most
t a x e f fe c t i ve fo r you. For help working this out, why not
contact our Financial Planning Team*? Advice about
salary sacri˜ce is part of your membership, so you

won™t pay any extra fees for this service. G o to

˚rstsuper.com.au/advice
to ˜nd out more.
Alternatively, the Super Contributions Optimiser gives
you an idea of how much to contribute for the biggest
boost to your super. Explore your contribution options

at
˚rstsuper.com.au/calculators
.
Am I locked into my salary sacri˜ce arrangement?
No. The only limitation may be how frequently your
workplace is happy to adjust your arrangement. But you
can change your salary sacri˜ce contributions at any time.
Should I salary sacri˜ce before retiring?
Salary sacri˜ce can be a great way to give your super a
boost before you stop working. But we would recommend
seeking help from a First Super Financial Planner* if you
want to salary sacri˜ce as part of your retirement plan.
HOW TO SET UP A SALARY SACRIFICE ARRANGEMENT
1.

Talk to the payroll team at your workplace. They should be able to set this up for you.
2 .

G e t everything in writing, including the date the arrangement st a r t s an d t h e p e rce ntag e o r a m ou n t o f s al a r y yo u ™ve c h o s e n
to sacri˜ce from each pay run. This way both you and your employer have something to refer to if you want to make
changes later or need to check what™s been agreed.
Important information:
The material contained in this bulletin is accurate and reliable as at August 2021.
This information is of a general nature only and does not take into account your personal circumstances or
situation. We recommend that you seek quali˜ed ˜nancial advice before making any investment decision. The
bulletin is provided by First Super Pty Ltd ABN 42 053 498 472, AFSL No. 223988, as the Trustee of First Super
ABN 56 286 625 181. If you intend to invest in or continue to hold this product you should obtain and consider a
copy of the Product Disclosure Statement which is available by phoning 1300 360 988.
*First Super Financial Planners are authorised representatives of Industry Fund Services Limited

(ABN 54 007 016 915, AFSL 232514).
First Super Pty Ltd
ABN 42 053 498 472
AFS Licence No: 223988
RSE Licence No: L0003049
First Super Pty Ltd

as Trustee of First Super

ABN 56 286 625 181
WANT TO KNOW MORE? WE’RE HERE TO HELP.
Call our Member Services Team on
1300 360 988
for general advice about super contributions.
Watch our FIRSTtalk video on this topic at
˚rstsuper.com.au/˚rst-talk
.
Go to
˚rstsuper.com.au/advice
to see how our Financial Advice Team could help you.