Salary Sacrifice

How Much Can You Salary Sacrifice to Super? What Are the Limits?

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If you want to reduce your tax as much as possible through super contributions you need to know how much you can salary sacrifice.

Salary sacrificing into Super is the perfect way to simultaneously boost your super balance and reduce not only your personal income tax but also tax on investment earnings between now and retirement.

So in this article I’m going to show you how much you can salary sacrifice based on the general $27500 cap but also how much you can contribute how you can contribute much much more reducing your personal tax even further.

How Much Super Can I Salary Sacrifice Into Super?

The amount you can salary sacrifice into Super is based on your wage the contributions caps, your super balance and how much you have contributed in previous years I know it sounds complex but it’s not overly let’s take a look.

So there are two types of contributions:-

Types Of Contributions

So there are two types of contributions that you can make to Super these are

1 .Concessional Contributions

2 .Non-Concessional Contributions

Each Financial year there is a maximum that you can contribute for both of these types of contributions.

But for now we’re going to ignore the Non-Concessional Contributions in this article because they are not relevant.

For concessional contributions the Concessional Contributions general concessional contribution cap is $27,500 per person per Financial year and the types of super contributions that count towards this $27,500 contribution cap include

  • Employer Superannuation (SG Contributions)
  • Salary Sacrifice Contributions
  • Personal Confession Contributions

All of these types of contributions count towards the same concessional contribution cap.

So the first thing we need to do in determining how much you can salary sacrifice into Super is to calculate how much you expect to receive in employer SG contributions.

Now for the current year your employer is required to make SG contributions into your super account equal to 10.5% of your wage or salary.

Therefore if you are earning say a $100,000 over the course of a financial year your employer would need to pay $10,500 into your super account for the year

General $27,500 Cap

So knowing that the general concessional contribution cap is $27,500 for the year a quick calculation will tell you that this leaves $17,000 available in the cup for you to salary sacrifice.

Because $10,500 + 17,000 equals the general concessional contribution cap of $27,500.

SALARY$100,000
SG CONT.(10.5%)$10,500
CC CAP$27,500
AVAILABLE CAP$17,000

But there’s a few other things to consider

High Income Earner

So if you are a high income owner your employer is not required to pay 10.5% superannuation guarantee contributions on your total salary.

An employer is only required to pay a maximum of 10.5% on wages up to $60,220 per quarter and this is known as the Maximum Contribution Base.

Therefore if you earn more than $240,880 for the year the maximum your employer needs to pay into your super account is $25,292.40 leaving an available $2207.50 or 60 cents in the cap.

Now to be clear an employer is not restricted by the maximum contribution base, they can in fact pay your 10.5% on your total wage if they wish but they are not required to by law.

So it’s best to check with your employer how much is expected to be contributed into your super account by them for a year prior to making any salary sacrifice Arrangements.

But we’re not done yet because the there are other factors that impact the amount you can salary sacrifice into Super such as the carry forward unused concessional contribution cap Provisions.

Carry Forward Rule

The Carry forward rules allow you to carry forward any unused portions of the concessional contribution cap for a rolling five-year period beginning from the 2018-19 financial year.

So the cap back then was $25,000 and it changed to $27,500 from first of July 2021.

So let’s say that you received concessional contributions of Carry Forward Rule.

Carry Forward Rule Example

$1000 in the 2019 Financial year and $20,000 in the 2020 year and $20,000 in the 2021 year and $20,000 in the 2022 year.

You would have carry forward contributions amounts of $22,500.

So that’s the unused portions added up from the year the cumulative amounts heading into the 2023 Financial year + the general 2023 Financial year cap of $27,500 allowing you to receive concessional contributions of up to $50,000 for the 2023 Financial year.

However and this is a big however you can only utilize the unused carry forward amounts in a financial year if your super balance was below $500,000 on 30th June of the previous Financial year.

So to use the carry forward amount of what was $22,500 for the 2023 Financial year you would have needed to have had a total super balance below $500,000 on 30th June 2022.

ExampleConcessional Contributions ReceivedGeneral Concessional Contribution CapCarry-Forward Unused Amount
2018/19$20,000$25,000$5,000
2019/20$20,000$25,000$5,000
2020/21$20,000$25,000$5,000
2021/22$20,000$27,500$7,500
2022/232023 FY Cap= carry forward amount of $22,500 + General Cap of $27,500

If it was higher you cannot utilize the unused cup amounts it can still obviously use the $27,500 though I hope that makes sense.

Salary Sacrifice Example

Let’s assume that you earn a salary of a $100,000 and had a super Salary Sacrifice Example balance of $400,000 on 30th of June 2022 and had carry forward unused contributions of $22,500.

Salary$100,000
Super Balance 30/6/2022$400,000
SG Contributions (10.5% of salary)$10,500
General Concessional Cap$27,500
Carry-Forward Unused Concessional Cap$22,500
How Much Can I Salary Sacrifice?$39,500

Now you would be receiving employer SG contributions of $10,500 for the year being 10.5% of a $100,000 and based on the general concessional contribution cap of $27,500 + your carry forward amount of $22,500.

Which can be utilized because your super balance was below $500,000 on 30th of June 2022.

You can salary sacrifice in amount of $39,500 being $27,500 the general cap + $22,500 the carry forward amount minus $10,500 of employer contributions.

However it is important to understand whether or not you should be salary sacrificing this amount in one single year it needs to be beneficial to do so and you need to consider whether or not it might be worth saving.

Some of your carry forward unused cover amounts for future years you should also consider any potential bonuses coming up in the current year or maybe increases in salary which may result in additional SG contributions from your employer and effectively reducing the amount that you can salary sacrifice.

We’ve also assumed that you haven’t made any personal concessional contributions into your super account for the year which also count towards the concessional contribution cap now to find out your carry forward unused cover Mount leading into the current year.

You can log into your Mygov account click on ATO services and then follow the menu tab to Super information carry forward concessional contributions hopefully this helps you understand how much you can salary sacrifice into Super.

Also Read

8 ways to legally Reduce Tax In Australia 2023

Conclusion

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