Salary Sacrifice

carmo · 25 June 2006

If my gross pay was $700 a week and I was to Salary Sacrifice $100, would my employer contribute 9% on the $700 or $600?

Bomba · 25 June 2006

Its up to your employers discretion.

They are only obliged to pay the 9% SGC based on the $600. Ask your employer prior to Salary Sacrificing to see if they will pay on the $700 or $600.

If your with a good employer, they will pay you on the $700.

However as i mentioned above, for the employer to discharge their 9% obligation, they only have to pay you the 9% based on $600.

carmo · 25 June 2006

So in real terms you are actually paying 24% as opposed to the 15% tax. This certainly makes it less attractive if you are making less than $70,000 a year!

clowboy · 25 June 2006

From memory that is about to become 90,000 per annum.

PennyHopeful · 25 June 2006

its also important to remember that salary sacrifice to super is considered "employer contributions" and therefore, at the employers discretion, they can consider there SG obligation met.. as per example before on a pay of $700 the SG of 9% = $63.. if you salary sacrifice $100 the $63 obligation has been met... this is obviously at the discretion of the employer so its something to discuss prior to making a decision.

carmo · 25 June 2006

This is sounding less and less attractive. Everything has its price!

clowboy · 25 June 2006

Don't forget about the whole, can't have it until 65......that is the biggest turn off for me.

Also do you qualify for the Co-contribution? That would be the first thing I would start with.

carmo · 26 June 2006

No I do not qualify for the Co contribution, though my wife did. It seems to me that the government should be changing legislation on this. Here I was thinking about puting in $100 a week into Salary Sacrifice and basically it would be not worth it!! I should point out that I have not spoken to my employer about this, guess thats my next move, to see their veiw.

Bomba · 26 June 2006

if you're salary sacrificing to reduce tax, then there are other ways to reduce your tax liability.

You can negative gear via shares or managed funds, through a margin loan.

or

You can invest in an agricultural MIS offered by the likes of Great Southern, where the initial capital you invest can be claimed as a 100% tax deduction, in the tax year you are investing.

clayton4115 · 26 June 2006

how can you note qualify for co-contribution? $700 pw is approx $37k it cuts off at $58k for co-con, but also remember you need to add on anyother income to the $37k, ie rental or dividend income to work out your co-contribution entitlement.

clowboy · 26 June 2006

probally trading shares,

I found out the hard way what that does to your gross income (which is what they base the co-con on. EVERY share sale is deemed income which effects your gross income.

carmo · 26 June 2006

Hi Clayton, you have actually ansered your own question, dividends and capital gains. I have drafted a letter to my local MP, I am outraged at this.
It appears the Salary Sacrifice is only for the very rich. I used an example of a $1000 a gross, with a $100 SS. End result for super fund:-
No SS contribution - $90/week ( Paid by employer )
$100 contribution - $85/week ( Paid by employee )
This is BS, let you know if I get a reply from the MP, I won't be holding my breath!

clayton4115 · 26 June 2006

hi

just to let you know salary sacrifice is most beneficial on people on the highest marginal tax rate 46.50% (as of July 1 06).

carmo · 27 June 2006

I think they are the ONLY ones who benefit!!

Salary Sacrifice

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