Salary sacrificing is a big decision—and one that can be about more than just your super. You’re trading your immediate salary for future benefits, so it’s crucial to ensure you’re making the best choice for your financial situation, and goals.
When undertaken correctly, salary sacrificing can be a tax-effective strategy to receive more benefits from your income, while ensuring your future financial health is taken care of.
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Our investment strategy advisers are here to help make salary sacrificing a beneficial investment strategy for your financial future. Whether it’s putting more money aside in your super, receiving fringe benefits, paying off a lease, or even directing money to utility bills, we’ll help you determine the right way to utilise salary sacrificing in your investment strategy toolkit.
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Salary sacrificing can be complex, so trust the financial advisers with the right experience and qualifications.
We’re here to help you understand how salary sacrificing can work for your situation, and to manage the process from start to finish.
Salary sacrificing is a taxation strategy that sees you give up a portion of your after-tax salary, in return for specific benefits. The benefits you receive are then paid out of the portion of your salary that you sacrificed, which remains un-taxed. This works to reduce your taxable income by the amount you choose to sacrifice.
Also known as salary packaging, this process needs to be agreed to by yourself and your employer.
The most common forms of salary sacrificing are for your superannuation, and on novated leases for vehicles. Here’s how they work.
Say your annual income is $100,000 plus super, and you’re considering salary sacrificing for your super. Under this method, you can choose to have a portion of your before-tax income paid directly into your super account. As this is technically classed as an employer super contribution, it gets taxed at the concessional rate of 15%, which is likely to be lower than your marginal tax rate.
If you choose to salary sacrifice $10,000 per annum into your super account, this means you’ll only pay your full marginal tax rate on $90,000 of your income. You’ll then pay 15% tax on the $10,000 you’re sacrificing.
Let’s say instead you’re looking at entering into a salary sacrifice arrangement to buy a new car. Under a novated lease agreement, this car costs $25,000 per annum for both the lease and its running costs. This means that $25,000 would essentially be taken out of your taxable income before tax, and you would only be taxed on the $75,000.
This means you’re now in a lower tax bracket, so you pay a lower tax rate on your $75,000 salary. You’re essentially receiving a $25,000 benefit pre-tax.
There are three main types of salary sacrifice benefits.
Depending on your employer and the industry or sector you work in, you could be eligible to salary package a range of expenses, including:
Salary sacrificing generally depends on your employer. Employers are required to pay FBT on certain salary sacrifice benefits to employees. There are certain industries that are exempt from FBT that are more likely to provide these benefits, however, all employers can still access salary sacrificing, you just need to be aware of the FBT implications.
Generally, most employees can opt into salary sacrificing as long as your employer is offering the benefit and the terms included. So be sure to check with your employer as to what they offer. Liston Newton Advisory is happy to assist you with your decision to salary sacrifice and help you understand the benefit that you’ll receive financially.
While there’s no limit on how much you can salary sacrifice into your super, there is a cap on the concessional contributions you can make. This currently sits at $25,000. Any concessional contributions that exceed this cap get taxed at your marginal tax rate, with an added excess concessional contributions charge on top.
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