Benefits of salary sacrifice
- Before-tax super contributions are taxed, but only at 15%.
- This means that if your income is taxed at more than 15% (rates range up to 47%), you will pay less tax (only 15%) on any before-tax contribution you make.
- If you normally pay 47% income tax, you will only pay 15% on any before-tax super contributions you make. That’s a difference of 32%. The 32% you would have paid in tax will instead go straight into your super account and be invested for your retirement.
Does this mean I get paid less each week?
If you salary sacrifice super contributions you will have less take-home pay each fortnight, but provided your personal tax rate is greater than 15%, the amount going into your super will be more than the amount your lose in take home pay.
The amount you decide to contribute is entirely up to you, so you can make sure it’s affordable within your budget.
Superannuation is about planning for retirement. A small change today can mean a big difference to your retirement lifestyle. Salary sacrificing an extra $100 per fortnight into super over 20 years could put you ahead by $63,543.*
Things you need to know
- The higher your income tax rate, the more benefit you get. The benefits for those earning less than $37,000 per year are limited.
- Your employer may have a cap on the amount you are allowed to salary sacrifice. Be sure not to exceed this amount.
- You should talk to your employer to make sure that you understand whether salary sacrificing amounts into super will impact on any other element of your remuneration.
- There is a limit on before-tax super contributions. See more information on contribution caps via the ATO website.
- Contributions into super generally must remain within super until you retire so you need to weigh up the benefits of extra super against other priorities, and you should take into account your objectives, financial situation and needs before making financial decisions.
How do I set it up?
- Check whether your employer allows you to salary sacrifice into super. Most departments and agencies allow salary sacrificing but it’s best to confirm with your personnel/HR section.
- Complete the Apply to join PSSap as an Ancillary Member [PDF 878 KB] form.
- Instruct your employer to deduct your nominated salary sacrifice amount from your regular pay. Once it’s set up, the nominated amount will automatically be deducted from your salary and deposited into your PSSap Ancillary account until you ask them to stop.
|Key features of a PSSap Ancillary membership|
|Type of scheme
||Profit for members meaning net investment returns are returned to members
|Eligible contributions/rollovers (for contributing PSS members)
- Salary sacrifice
- Personal (after-tax) contributions
- Spouse contributions
- Rollovers from other super
- Accumulated transfer amounts (post 1995) (contributing or preserved)
One or a mix of up to four investment options:
- Income Focused
You must choose an investment option when you join.
From 1 October 2016, PSSap Ancillary members will be able to apply for lifePLUS choice cover.
|Fees and costs
- Administration fee: $5 per month ($60 per year)
- Exit fee: $50 per withdrawal
- Investment management fees: estimated at 0.14% - 1.12% per annum based on the fund’s total assets
- First two investment option switches are free each financial year
- $20 for each subsequent switch in that year
|Keeping you informed
- Online account management
- Annual member statement
- Customer Information Centre
download Complete the PSSap ancillary membership form
* The estimated additional increase in super balance is the accumulated amount at the end of a 20 year period, assuming $100 (increased with inflation) is invested every fortnight over the 20 year period. Key assumptions: investment return of 3.5% p.a. (after fees, costs, taxes) and after allowance for inflation of 2.5% p.a., tax rate on contributions: 15%. Future investment returns are not guaranteed. Actual returns could be higher or lower than the assumed investment return and could be negative. Salary sacrificing is not appropriate for all individuals and may impact other aspects of your remuneration. After you put a contribution into super it must stay there until you retire so weigh up the benefits of extra super against other priorities. This is general information only and has been prepared without taking into account personal objectives, financial situation or needs. You should consider your personal objectives, financial situation or needs before taking any action.