The amount that you are able to salary sacrifice into superannuation is determined by two factors:
1. Your age
2. The amount of employer contributions that you receive
Salary Sacrifice contributions and Employer contribution (e.g. SG Contributions) are considered Concessional Contributions. A Concessional Contribution is a contribution that a person or entity has claimed a tax deduction for.
You are limited to the amount of Concessional Contributions that can be made into a superannuation account on your behalf in any one year.
This is know as the Concessional Contribution Cap.
The general Concessional Contribution cap is $25,000 p.a.
However, the Concessional Contribution cap is increased to $35,000 for the 2013/14 year for those over age 59 on 30 June 2013 and for those over age 49 on 30 June 2014 for the 2014/15 financial year. Tables tend to explain this better!
|Income Year||Cap for those aged 59 years or over on 30 June 2013||Cap for those aged 49 years or over on 30 June 2014|
|2014-15||$35 000||$35 000|
|2013-14||$35 000||$25 000|
For everyone else, the General Cap is $25,000 p.a. (Update: The General Concessional Contribution Cap for the 2014/15 financial year is $30,000)
How Much Can I Salary Sacrifice?
The amount you can salary sacrifice into superannuation is the difference between your Concessional Contribution cap and the amount of employer contributions you are receiving.
For example, let’s say that you are 41 years of age and your salary is $80,000 p.a. in the 2013/14 financial year and your employer is paying the compulsory SG contributions of 9.25% p.a. on your salary, equating to $7,400 p.a.
This will mean that you have used up $7,400 of your Concessional Contribution cap (assuming no other Concessional Contributions). As such you will be left with $17,600 in your cap. Therefore, you will be able to salary sacrifice $17,600 of your wage throughout the year without exceeding your Concessional Contribution cap.
If you were 61 in the scenario above, you would be able to salary sacrifice $27,600, as your Concessional Contribution cap is $35,000.
What if I exceed the Concessional Contribution cap?
If you incorrectly calculated how much you can salary sacrifice into super, you be at risk of exceeding the Concessional Contribution cap. This would result in the excess effectively being taxed at you Marginal Tax Rate and counting towards your Non Concessional Contribution cap. In this instance you may apply to pay some or all of the excess tax using your superannuation savings.
Will the amount I Salary Sacrifice affect my SG contributions?
This is an important point. An employer is only required to make SG Contributions on the salary they pay to you, not any amounts contributed to super under a salary sacrifice arrangement. Therefore, given the scenario above, if you salary sacrificed $17,600, the salary paid to you would be $62,400 ($80,000 – $17,600) and your employer may only be obligated to pay 9.25% on this reduced amount – equaling $5,772.
This highlights why it is very important to review your employment agreement and discuss any ramifications of salary sacrificing with your employer and/or an adviser, such as an accountant, financial planner or lawyer.
If you would like anything clarified or have any further questions about How Much Can I Salary Sacrifice into Super? or any other topics, please do not hesitate to leave a comment.