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Monday's Money Minute Podcasts
Every Monday we will be publishing a 2 to 4 minute audio podcast about current financial issues.  Click on the link for the relevant podcast to listen to the commentary.
Monday, September 10 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......

Click here to be taken to the podcast.

Posted by: Scott Keefer AT 01:23 am   |  Permalink   |  Email