December 2009
1
STATE SUPER
SAS Trustee Corporation
SuperViews
From the office of the Employee Representative SAS Trustee Corporation Board
Salary sacrifice your compulsory personal
contributions to SASS
There are several ways you can make your compulsory personal contributions to SASS as
detailed below. Before making this decision, it is recommended you seek professional
financial advice.
WHAT ARE THE CONTRIBUTION
ARRANGEMENTS?
Each year, by 31 December, you choose what
percentage of salary – between 1% and 9% – you
want to contribute to SASS as your compulsory
personal contributions.
Provided your employer agrees, your compulsory
personal contributions to SASS can be made:
• entirely from your before-tax salary (salary
sacrifice concessional contributions) or;
• entirely from your after-tax salary (nonconcessional contributions); or
• from a combination of before-tax and after-tax
salary.
Non-concessional contributions (after-tax) used to be
Ron Davis
Full-time Employee
Representative
PO Box N259,
Grosvenor Place
NSW 1220
known as undeducted contributions. Concessional
contributions include salary sacrifice and employer
contributions.
As SASS can only accept compulsory personal
contributions up to 9% of your salary, any additional
contributions must be paid into another scheme of
your choosing.
WHAT DO I NEED TO CONSIDER?
Salary sacrifice contributions are treated as employer
contributions and attract the Commonwealth
Government’s 15% contributions tax on entry to the
Scheme.
This means the amount you contribute needs to be
increased (or grossed up) by an amount representing
continued on page 2
2
Salary sacrifice your compulsory personal contributions to SASS
continued
the contributions tax, so that you make the same net
contribution to SASS that you would have made via
after-tax contributions. For example, if you choose to
contribute at 6%, you would need to contribute 7.06%
of salary, ie an additional 1.06% of salary on a before-tax
basis. The formula is: contribution rate ÷ 0.85. The
grossing-up of contributions is arranged with your
employer as part of overall Salary Packaging
arrangements.
The grossed-up salary sacrifice contribution rates for
specific after-tax contribution rates are:
After-tax
contribution rate
1%
2%
3%
4%
5%
6%
7%
8%
9%
Salary sacrifice
rate
1.18%
2.35%
3.53%
4.71%
5.88%
7.06%
8.24%
9.41%
10.59%
We recommend you seek professional financial advice
about making salary sacrifice contributions.
IS SALARY SACRIFICE RIGHT FOR ME?
It depends on your individual circumstances. You may
receive more take-home pay if you make your
contributions via salary sacrifice. However this depends
on your level of income so you should seek professional
financial advice to help you decide whether to make
salary sacrifice contributions.
There is a handy calculator on our website that shows
you the effect of making contributions via salary
sacrifice, after-tax or a combination of the two.
The following example compares the effect on net salary
of salary sacrifice contributions for a member earning
$65,000 a year. The example assumes the member is
contributing 6% of salary and is not eligible for the
Commonwealth Government Co-contribution.
Visit us on the web at:
$65,000
$4,588
$60,412
$11,973
$48,439
In this example, making salary sacrifice contributions
resulted in a $689 increase in annual after-tax salary. In
both scenarios, the amount of net contributions credited
to SASS is the same.
The PAYG tax scale used in the example above is for the
financial year ending 30 June 2010. Future changes to
PAYG tax scales will result in different income tax and
net salary outcomes.
OTHER MATTERS TO CONSIDER
Do salary sacrifice contributions affect the superable
salary used to calculate my SASS benefits?
No. Your salary and your SASS benefit entitlements are
not affected by whether you make salary sacrifice
contributions.
Can I pay additional salary sacrifice contributions into
SASS?
No. SASS can only accept your compulsory personal
contributions between 1% and 9% of your salary. You can
make additional contributions to another superannuation
scheme of your choice.
Am I eligible for the Commonwealth Government
Co-contribution?
Generally, the Commonwealth Government’s
Co-contribution will be payable for the financial year
ending 30 June 2010 if you meet all of the following
conditions:
• you make personal superannuation contributions
from your after-tax income, and
• your total income* for the financial year ending
30 June 2010 was less than $61,920**, and
• at least 10% of your total income* is attributable to
employment, and
After-tax contributions
Gross salary
Less income tax (excluding Medicare)
Net salary
Less superannuation contributions
Net salary (after tax and super deductions)
Salary sacrifice contributions
Gross salary
Less salary sacrifice contributions ($3,900 ÷ 0.85)
Adjusted gross salary
Less income tax (excluding Medicare)
Net salary (after super and tax deductions)
$65,000
$13,350
$51,650
$3,900
$47,750
• you lodge an income tax return for the financial year,
and
• you are less than 71 years of age at the end of the
financial year, and
• you did not hold a temporary resident visa at any
time during the year.
www.statesuper.nsw.gov.au
SUPERVIEWS
* Total income means assessable income plus reportable
fringe benefits plus reportable employer superannuation
contributions.
** For the financial year ended 30 June 2010. Subject to
future annual indexation.
Do salary sacrifice contributions count for the
Commonwealth Government Co-contribution?
No. Only non-concessional (after-tax contributions)
qualify for the Commonwealth Government
Co-contribution.
How is the Co-contribution calculated?
For the year ended 30 June 2010:
• The Co-contribution is $1.00 for every $1 of nonconcessional contributions made in a financial year
(subject to the maximum Co-contribution available).
• For annual incomes up to $31,920**, the maximum
Co-contribution is $1,000.
• For incomes above $31,920**, the maximum of
$1,000 reduces by 0.3333 cents for each dollar of
income above $31,920, so that it phases out
completely at $61,920**.
**For the financial year ended 30 June 2010. Subject to
future annual indexation.
I RECEIVED A CO-CONTRIBUTION LAST YEAR –
SHOULD I MAKE SALARY SACRIFICE
CONTRIBUTIONS?
We can’t help you make that decision. You should seek
professional financial advice before deciding whether to
make salary sacrifice contributions.
APART FROM THE 15% CONTRIBUTIONS TAX, ARE
THERE OTHER TAX IMPLICATIONS?
3
• are counted in full towards the Concessional
Contributions Cap. Generally, contributions above the
cap will be taxed at a total of 46.5% (further details
are provided in Fact Sheet 16: SASS Concessional
Contributions Cap).
I’M INTERESTED IN SALARY SACRIFICE . . . WHAT
SHOULD I DO NOW?
• Check whether your employer will allow you to make
salary sacrifice contributions and when you can advise
changes to your salary packaging arrangements to
include any salary sacrifice contributions of your
compulsory personal contributions.
• With your employer’s approval, you can arrange to
salary sacrifice at any time of the year.
• Seek professional financial advice.
• Advise your employer of the portion (if any) of your
SASS contributions you want to make via salary
sacrifice.
CO-CONTRIBUTION ELIGIBILITY CHANGES FROM
1 JULY 2009
From 1 July 2009, salary sacrifice contributions are
Reportable Employer Superannuation Contributions and
will be included in the total income calculation. This
means that some members, who have previously met the
income threshold for Co-contribution payments, may no
longer be eligible.
The formula for calculating the maximum Co-contribution
amount is:
$1,000 – {(assessable income + reportable fringe benefits +
reportable employer superannuation contributions) $31,920) x 0.3333}.
Yes. The Australian Taxation Office requires any salary
sacrifice arrangement with your employer to be made in
advance. You will need to advise your employer in
advance so that appropriate deductions can be made
from your salary. Salary sacrifice contributions:
• are subject to tax on benefit payment unless taken
after age 60.
Disclaimer: Reasonable care has been taken in producing the information in this newsletter, which gives a general interpretation of the issues. Relevant information
is subject to the Acts that govern the Schemes mentioned in the newsletter and those Acts will prevail to the extent of any conflict. None of the SAS Trustee
Corporation (STC) Board members or officers warrant the accuracy, reliability or completeness of the information in the newsletter and all of them exclude liability
for any decision taken on the basis of information shown or omitted from the newsletter. In preparing this newsletter, STC has not taken into account your
objectives, financial situation or needs and, because of this, you should consider your personal circumstances and possibly seek professional advice, before making
any decision that affects your future. With respect to material in this newsletter that has been prepared by organisations other than STC, STC does not necessarily
agree with the opinions expressed therein, nor take any responsibility for the accuracy or completeness of the information contained in that material.
or phone Customer Service:
SASS 1300 130 095; SSS 1300 130 096; PSS 1300 130 097
4
When is the Right Time to Retire?
The last two years have been a particularly
uncertain period for many investors. With the
severe contraction of major economies
during the Global Financial Crisis, and the
subsequent partial market recovery as
confidence was restored, some people have
chosen to defer retirement and work a little
longer. Retirement can be a daunting
thought, especially when we consider that life
expectancies continue to increase, and
research shows that people retiring at 60 are
now likely to spend at least 25 years or more
in retirement. Understandably, many of us
are becoming increasingly concerned we
simply won’t have sufficient money saved to
last throughout our retirement.
partially affected by recent market volatility.
In a hybrid scheme your super is generally
comprised of defined benefits, based on a
formula, as well as accumulative benefits,
based on your contributions and market
returns. However, compared to the members
of most super funds in Australia, you will not
have seen your super balances contract to
the same degree.
In fact, there are many other factors that
should have a greater bearing on your
decision to retire than the state of the
investment markets.
Can you afford to retire?
More important than the size of your nest
egg is the fundamental question of whether
your savings will last throughout your
retirement. The answer depends on what
you plan to do in retirement. Your ongoing
lifestyle requirements will have a major
Do you understand your super
impact on your retirement affordability, as will
your plans for capital expenditure. Are you
scheme?
planning home renovations, a new car or an
While most investors in Australian super
funds have watched their super balances fall overseas holiday? Large expenses early in
your retirement may increase the risk that
and then partially recover over the past two
years, members of defined benefit schemes, you will outlive your capital, and require you
to take a more conservative approach to
such as the State Superannuation Scheme
(SSS) and the Police Superannuation Scheme investment, potentially reducing your
opportunities.
(PSS), have generally not been affected by
market conditions at all. That’s because their
super benefits are based on a formula, which Will you maximise your benefits?
includes variables such as salary, age, length There may be advantages to leaving work at
of scheme membership, levels of member
a specific time, or in particular
contributions, and the method of exit.
circumstances, because they may change
how your benefit is calculated. If your benefit
If you’re a member of the State Authorities
is based on final salary, and you know there
Super Scheme (SASS), then you’re a member is a pay rise due, it may be in your interest to
of a hybrid scheme, and you will have been
plan your retirement around that date.
In this article we consider the unique
circumstances of members of defined benefit
schemes and look at key factors they should
consider when planning their retirement date.
Perhaps there are prospects of a redundancy
exit, which may boost your retirement nest
egg. You should consider the implications on
your super benefit of accessing your long
service leave as a lump sum at retirement, or
taking it as salary before you retire.
Other considerations
There’s no point working so long that by the
time you retire, you’re too old or immobile to
do the things you had planned. Will you miss
work? Many retirees fail to place a value on
the social interaction that their work provided
to them, or the status they enjoyed in the
workplace. Others replace work successfully
with other ventures, including volunteer work,
returning to study, hobbies or sporting
activities or even part time work.
How State Super Financial
Services can help
Almost 20 years ago your Trustee established
State Super Financial Services Australia
(SSFS) to ensure all members have access to
professional financial planning advice. As
experts in public sector super, SSFS has
helped thousands of current and former NSW
public sector employees maximise
opportunities to boost their retirement
savings.
While there are no hard and fast rules about
when the right time is to retire, your SSFS
financial planner will help you maximise your
scheme benefits and set you on a course to
achieving your retirement goals. With 15
offices across NSW, Canberra, Brisbane and
Melbourne, you can meet with a SSFS
financial planner at a convenient location
without cost or obligation.
To find out how State Super Financial Services can help assist you, call the Advice
Centre on 1800 620 305 or visit our website at www.ssfs.com.au
This information is of a general nature only, is not comprehensive, and is not specific to your personal circumstances or needs. It is published for your
interest. Before making any decisions based on this information you should consider its appropriateness to you. Every effort has been made to ensure the
information contained in it is accurate. We strongly recommend that you consult a Financial Planner before taking action based on this information.
State Super Financial Services Australia (SSFS) is the holder of Australian Financial Services Licence 238430, ABN 86 003 742 756 and is a principal
member of the Financial Planning Association of Australia. Neither the SAS Trustee Corporation, nor the NSW Government take any responsibility for this
article or the services offered by SSFS, and nor do they or SSFS guarantee the performance of any product provided by SSFS.
State Super Financial Services Australia Limited ABN 86 003 742 756 AFS Licence 238430
(12/09)