Continuing on the series on superannuation, it is now worth considering whether people who currently salary sacrifice superannuation should consider alternative arrangements from 1 July 2017.
From 1 July 2017 all Australians are able to contribute a maximum of $25,000 to superannuation as concessional contributions. Concessional contributions are contributions that persons are able to claim a tax deduction for. For many persons deriving salary and wage income, the only way to achieve the maximum contribution is to salary sacrifice super contributions. Contributing to super in this manner can reduce the SGC (Superannuation Guaranteed Contributions) which is payable by their employer. This occurs as SGC is not required to be paid by the employer on salaried sacrificed payments. An example of this is as follows:
Caroline’s current package is $100,000 plus 9.5% super guarantee. During the 2017 financial year Caroline elects to salary sacrifice $10,000 to superannuation. A comparison of her superannuation contributions with and without the salary sacrifice arrangement is:
| Salary arrangement | Annual Salary | SCG Super | Salary Sacrifice | Total Super |
| No salary sacrifice | $100,000 | $9,500 | Nil | $ 9,500 |
| Salary sacrifice $10k | $ 90,000 | $8,550* | $10,000 | $18,550 |
*Since Caroline’s employer is not required to pay the 9.5% compulsory superannuation on the salary sacrificed component of her salary, she loses $950 of her ordinary super contributions.
Under the new legislation from 1 July 2017 Caroline can now contribute her $10,000 to superannuation using after tax money. Her revised arrangement is now as follows:
| Salary arrangement | Annual Salary | SCG Super | Tax deducted super | Total Super |
| No salary sacrifice | $100,000 | $9,500 | Nil | $ 9,500 |
| Post tax contribution of $10,000 | $100,000 | $9,500 | $10,000 | $19,500 |
By choosing to cease the salary sacrifice arrangement, and contribute after tax dollars, Caroline does not forgo the compulsory superannuation contribution. Caroline benefits from an extra $950 of super contributions annually.
Of course the above depends on whether Caroline has the financial resources to make the after tax contribution or she has the discipline to save funds during the year.
The above also assumes that Caroline’s employer does not pay SGC on salary sacrificed contributions. This will depend on your employment contract/conditions.
Every taxpayer’s situation is unique, hence the benefits demonstrated above may vary. We recommend that if you are considering a change your arrangements, you contact our office to discuss.
