Salary sacrificing to superannuation is a tax effective method to reduce your personal income tax and is also a good avenue to build up your superannuation balance for retirement.
However, as the current concessional contribution cap has been reduced to $25,000 per financial year, it is prudent not to exceed the $25,000 cap as extra tax will be payable on the amount above the $25,000 which may substantially reduce the tax benefit of salary sacrificing to superannuation.
Accordingly, for employees that have an existing arrangement with their employers to salary sacrifice part of their regular pay to superannuation, they need to review the payments going to the superannuation provider to ensure the total of the salary sacrifice and the compulsory employer contribution do not exceed the $25,000 cap.
Compulsory employer contribution is the standard 9.5% superannuation guarantee that employers are contributing to a superannuation provider on behalf of their employees.
Regardless of the size of the business, employers are required to contribute the equivalent of 9.5% of an employee’s ordinary time earnings (typically wages or salary).
Please also note that the annual non-concessional contribution cap has also been reduced from $180,000 to $100,000 and the bring-forward cap reduced from $540,000 to $300,000 accordingly.
Should you wish to discuss in detail the impact that these changes may have on your personal circumstances, please contact Hanh On, our Superannuation Partner, on (03) 9810 0700 or firstname.lastname@example.org.