If you are an employee, salary sacrificing to super is an attractive option to boost your super balance, as well as getting a tax saving. Though did you know that if you salary sacrifice to super, you could be missing out on part of your super guarantee?
The super guarantee is a compulsory system of superannuation that employers pay on behalf of their qualifying employees. Employers are obligated to contribute 9.5% of their employee’s salary or wage into super. As well receiving the super guarantee, some employees choose to make super contributions through a salary sacrifice agreement. However, an issue that some employees face is that their employers do not pay the super guarantee on their entire salary – they only pay the super guarantee on their reduced salary (their salary less the salary-sacrificed amount). This is where some employees miss out on part of their super guarantee.
Luckily, there is another option for employees. As of 1 July 2017, employees are able claim a deduction for personal super contributions they make to their superfund. If employees choose to do this rather than salary sacrifice, they will still reduce their taxable income, but they also will receive the super guarantee on their total salary (which may not be the case if you salary sacrifice to super).
It is important to note that your employer may not be obligated to pay the super guarantee on your entire salary if it does not state that they must do so in your salary sacrifice agreement. If you want to know whether you are receiving the super guarantee on your entire salary, check with your employer or your payroll department.
Be careful of how much you contribute to super – the contributions that you claim as a deduction will count towards your concessional contributions cap, and so does the 9.5% super guarantee. If your combined super contributions exceed the $25,000 cap, you will be liable to pay extra tax.
Author: Tessa Jachmann