Retirement and Super > Salary sacrifice
Salary sacrifice
Use a salary sacrifice strategy to take advantage of pre-tax contributions
What is salary sacrifice?
Salary sacrifice is an astute financial strategy that involves an agreement between an employee and their employer, wherein the employee agrees to forego a portion of their pre-tax salary in exchange for benefits of equal value. Among the most popular benefits chosen are contributions to superannuation, which not only aid in building a robust retirement fund but also offer immediate tax advantages. This method is particularly effective for those planning a financially stable future, allowing for greater savings accumulation through tax-efficient channels.
How does salary sacrifice work?
Salary sacrifice is straightforward yet powerful: before your salary is taxed, a portion of it is diverted directly into your superannuation fund. This process reduces your taxable income because only your reduced salary is subject to income taxes. The amount sacrificed enjoys the benefit of being taxed at a concessional rate of 15% within the super fund, significantly lower than most marginal tax rates. By effectively lowering your taxable income, salary sacrifice can lead to substantial tax savings, particularly for mid to high-income earners.
Salary sacrifice super vs voluntary contribution
Understanding the distinction between salary sacrifice and voluntary contributions is vital for effective retirement planning:
- Salary sacrifice super contributions: These are made before any taxes are applied to your income, directly reducing your taxable income and providing immediate tax benefits. This is considered a concessional contribution.
- Voluntary contributions: Also known as non-concessional contributions, these are made from your after-tax income. These contributions do not affect your taxable income since the money has already been taxed. However, they can qualify for a government co-contribution, depending on your income level.
Both methods boost your superannuation but have different impacts on your immediate tax situation and long-term savings growth. Choosing the right method depends on your income level, tax situation, and financial goals related to retirement planning.
Our salary sacrifice specialists
With over 25 years of experience each, Tim and Paul bring a wealth of knowledge and a personal touch to Financial Planning at APS. Tim launched our Financial Planning department in 2006 and is known for his simple, straightforward strategies that help clients maximise their financial assets. As a Certified Financial Planner (CFP), Life Risk Specialist (LRS) and Advanced Diploma holder, he also has extensive expertise in Government Superannuation funds and is often called upon to share his knowledge at seminars. Paul’s background spans wealth creation, cash flow management, retirement planning, Centrelink strategies, insurance, debt minimisation and superannuation. He has guided clients from all walks of life, from wealth accumulators to retirees, and takes pride in making financial advice clear, practical and supportive. Together, Tim and Paul take the time to listen, understand, and tailor strategies that give you clarity and confidence at every stage of life.

Is salary packaging a fringe benefit?
While salary packaging can include a range of benefits, such as cars, education, and health insurance, not all packaged benefits are considered fringe benefits. Specifically, salary-sacrificed super contributions are not subject to Fringe Benefits Tax (FBT). However, other perks, depending on their nature, may attract FBT, and it is crucial to understand the tax implications of each benefit under your salary packaging agreement.
Is salary sacrificing right for me?
Salary sacrificing is an excellent strategy for individuals looking to minimise their tax liabilities while maximising their retirement savings. It is most beneficial for those in higher tax brackets or those who have the financial flexibility to forgo a portion of their income for long-term benefits. However, it may not be suitable for everyone, particularly those on lower incomes or those who need immediate access to their income for everyday expenses.
How do I set up salary sacrificing?
Setting up salary sacrificing involves a few key steps.
- Financial review: Analyse your financial situation to determine how much you can afford to sacrifice without impacting your lifestyle.
- Employer agreement: Confirm that your employer offers salary sacrifice as part of their employment benefits and formalise the agreement.
- Consult a financial advisor: Especially for those new to salary sacrificing, consulting with a financial advisor can ensure that this strategy aligns with your overall financial and retirement goals.
- Implementation: Once agreed upon, the salary sacrifice arrangement will be set up by your employer, and your pre-tax contributions will begin to be diverted into your specified account.
Save for retirement by salary sacrificing
Incorporating salary sacrifice into your retirement planning strategy can significantly enhance your financial preparedness for retirement. By effectively reducing your tax burden and increasing your superannuation contributions, salary sacrifice not only secures a more substantial financial base for your retirement but also optimises your current financial resources.
Planning for a comfortable retirement requires smart, proactive strategies, and salary sacrificing is among the most effective means to boost your retirement savings. If you’re considering enhancing your retirement strategy with salary sacrifice, APS’s financial services are here to guide you through every step. Contact us today to learn how we can help you maximise your retirement readiness with personalised salary sacrifice arrangements.
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