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 Financial Happenings Blog 
Sunday, September 09 2007

Today's 'Monday Money Minute' looks at a powerful personal finance strategy - the salary sacrifice to superannuation.

The power of this strategy is that a significant amount of tax is saved by salary sacrificing income to superannuation, where it is taxed at a maximum of 15%, rather than paying income tax on this money which might be up to the rate of 46.5%. 

However, some employers use a nasty trick.  They only pay the 9% contribution on the after salary sacrifice income.  Let's look at how that works.  Let's say you earn income of $50,000.  Your employer has to pay compulsory 9% contributions of $4,500.  Let us now say that you decide to salary sacrifice $10,000 to superannuation - which will save you $1,650 in tax.  Your income, after the salary sacrifice, is now $40,000.  Some employers will only pay the 9% contribution on this amount - $3,600.  You still end up ahead, however not by as much as if the employer had paid contributions on the full $50,000.

Only a minority of employers do this - most continue to pay the 9% on your full $50,000 salary.  However, it is worth knowing what your employer is doing.  You might just be better of moving on somewhere else......

 

Posted by: Scott Francis AT 07:35 pm   |  Permalink   |  Email
 
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