Retirement Benefits Fund
Salary sacrifice
Salary sacrifice is an agreement between you and your
employer where you choose to give up or ‘sacrifice’ part of
your before tax salary which your employer instead pays
directly into your superannuation account. It’s a simple and
potentially effective way of growing your superannuation.
How does it work?
Salary sacrifice contributions are deducted from your salary
before income tax is calculated. Salary sacrifice contributions
are considered concessional (employer) contributions
and are taxed at 15% when they are received by your
superannuation fund. This means that the sacrificed amount
could be more favourably taxed than if it was taken as a
normal cash salary.
Depending on your income level, this could mean
significant tax savings.
If you are a member of an RBF defined benefit scheme,
please refer to page 3 for additional information.
Benefits of salary sacrifice
The benefits of salary sacrifice include the following:
Salary sacrifice may allow you to reduce your taxable
income and potentially pay less income tax.
Money contributed to superannuation as salary sacrifice
and within the concessional cap attracts a tax rate of just
15% which is lower than most people’s marginal tax rate.
People aged 60 and over are now able to withdraw their
money from superannuation tax-free (upon retirement or
meeting certain conditions).
Calculate the benefits of extra contributions by using the
salary sacrifice calculators on our website, www.rbf.com.au
Points to consider about salary sacrifice
The Federal Government places limits on how much you
can salary sacrifice into superannuation at the low tax
rate of 15%. These limits vary depending on your age and
whether you have provided your tax file number (TFN),
as detailed below.
Tax on concessional contributions
Age
TFN provided
TFN not
provided
Up to
age 50
Contributions up to $25,000pa are
taxed at 15%
Taxed at
46.5%
Contributions in excess of $25,000pa
are taxed at 46.5% and count towards
your after-tax contribution limit.
Over
age 50
Contributions up to $50,000pa are
taxed at 15%
Taxed at
46.5%
Before-tax contributions in excess of
$50,000pa are taxed at 46.5% and
count towards your after-tax limit.
Salary sacrifice may not be as effective for lower income
earners because the tax rate on your salary may be
about the same, ie 15%, as on your superannuation
contributions. If you are a lower income earner you may
wish to consider making personal contributions so that
you can access the Government Co-contribution.
Check with your employer that you are able to salary
sacrifice and that doing so will not affect work entitlements
such as annual leave, shift allowances and overtime.
Salary sacrifice contributions to a complying
superannuation fund are not subject to income
tax or Fringe Benefits Tax (FBT). However, any
amounts that you salary sacrifice are considered
when calculating your eligibility for a number of
Government Benefits. Contact the ATO for more
information, www.ato.gov.au
Contributions made to superannuation are generally not
accessible until you reach your preservation age and
retire from the workforce.
Continued overleaf
Salary Sacrifice
2
Case studies
Angela’s salary is $65,000 a year. By changing her
method of contribution from personal after-tax to
salary sacrifice she can contribute an additional
$520 per year to her superannuation without
significantly reducing her take-home pay.
Personal
contributions
$70,000
$63,525
$64,188
$55,788
$55,136
$5,737
$9,052
No salary sacrifice
Salary sacrifice
$60,000
$50,000
Salary sacrifice
contributions
Salary
$65,000
$65,000
Employer SG
Contributions
$5,850
$5,850
Salary sacrifice
contributions
$0
$2,600
Taxable income
$65,000
$62,400
- Income tax
$14,040
$13,156
- Personal contributions
$1,690
$0
= Take home pay
after superannuation
contributions
$49,270
$49,244
Total superannuation
contributions*
$6,662
$40,000
$30,000
$20,000
$7,182
Phil’s annual salary is $75,000. At the moment he does
not contribute to superannuation at all. He is considering
starting salary sacrifice contributions to improve his
retirement savings.
No salary
sacrifice
Salary sacrifice
$10,000
$0
Net salary
Net super
Including his superannuation contributions, overall Phil is
$633 better off, although his after-tax income has reduced.
Making additional superannuation contributions by salary
sacrifice has resulted in an overall increase in his total
after-tax position.
How to start salary sacrificing
Salary
$75,000
$75,000
Employer SG
Contributions
$6,750
$6,750
Salary sacrifice
contributions
$0
$3,900
Taxable income
$75,000
$71,110
Tasmanian Accumulation Scheme – Election to vary
regular contributions
- Income tax
$17,212
$15,964
RBF Contributory Scheme – Election to vary contributions
= Take home pay
after superannuation
contributions
$57,788
$55,136
State Fire Commission Superannuation Scheme – Election
to vary contributions
Total superannuation
contributions*
$5,737
$9,052
*After 15% contributions tax deducted. Based on 2010-11 tax rates.
1.Talk to your employer about salary sacrifice
2.Complete the appropriate salary sacrifice form,
available on our website, www.rbf.com.au or by
calling 1800 622 631.
Tasmanian Ambulance Service Superannuation Scheme
– Election to vary contributions
3. Return the completed form as per the instructions on
the form.
Continued overleaf
Salary Sacrifice
3
How does it work for defined
benefit members?
This information affects members of the following defined
benefit schemes:
Contacting RBF
RBF Contributory Scheme
State Fire Commission Superannuation Scheme
Contact RBF if you would like additional
information or assistance.
Tasmanian Ambulance Service Superannuation Scheme
Visit: www.rbf.com.au
Members of the RBF Contributory Scheme are required to
contribute between 5% and 15% of salary.
Phone: 1800 622 631 or +61 3 8687 1863
(if you’re calling from overseas)
Members of the Tasmanian Ambulance Service
Superannuation Scheme (TASSS) are required to
contribute between 5% and 11% of salary.
Fax:
Members of the State Fire Commission Superannuation
Scheme (SFCSS) are required to contribute 5% of salary.
There are two methods by which you may make these
contributions: by personal contributions or by salary
sacrifice contributions.
(03) 9245 5827
Write: RBF, Reply Paid 446,
Hobart TAS 7001
Office: 39 Sandy Bay Road, Hobart
Level 1 87 George Street,
Launceston
If you make personal contributions, contributions are
deducted from your net (after-tax) salary.
Salary sacrifice contributions are taxed at 15% of the
contribution amount. This means that the amount you will
need to salary sacrifice is slightly higher to ensure sufficient
funds are available to cover the contribution amount
after the contributions tax is deducted. For example, a
5% contribution means you will need to salary sacrifice
5.8823%. The ‘Election to vary contributions’ forms will detail
this information.
It is not possible to split your contribution to your defined
benefit scheme between the two methods. That means you
need to choose to make your contribution to your defined
benefit scheme either as a personal contribution or as a
salary sacrifice contribution. Don’t forget you can make
additional contributions to your TAS account using salary
sacrifice, personal contributions or both methods.
To determine the amount of your concessional
contributions, a notional amount will be calculated using
a formula called the Notional Taxed Contributions.
Any advice contained in this fact sheet is of a general nature only and does not take into account your objectives, financial situation and needs. Readers should carefully
assess how appropriate the information is to their objectives, financial situation and needs and read the relevant brochures and fact sheets available at www.rbf.com.au
This fact sheet is not intended to be and should not be relied on as a substitute for legal, financial or other professional advice. The RBF Board is not qualified to
provide financial advice and we recommend that you consider seeking professional advice before making a decision based on this information. The information in this
fact sheet was current at the time of publication but is subject to change without notice.
Issued by Retirement Benefits Fund Board ABN 97 724 593 931 as Trustee for Retirement Benefits Fund (RBF) ABN 51 737 334 954.
AL/S/00261 (V5-07-10)
Retirement Benefits Fund