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Employees can salary sacrifice to the same superannuation fund as their superannuation guarantee contribution, to a different superannuation fund or to both. Salary sacrificing for superannuation affects the following values:
The salary amount in the employee’s Payment Summary decreases as specified in the salary sacrifice arrangement, which reduces the employee’s taxable income.
Salary sacrifice is not assessable income so it is not included in the Payment Summary and it is not subject to PAYG Withholding tax. Tax is calculated on:
Gross pay - Salary sacrifice deductions.
The salary sacrifice value is part of the employer’s 9.5% contribution to the employee’s superannuation.
If the salary sacrifice amount is greater than or equal to 9.5% of the employee’s earnings base, then the employer does not need to make any other contributions.
If the salary sacrifice amount is less than 9.5% of the employee’s earnings base, then the employer must contribute the balance.
These values are reduced by the salary sacrifice amount.
Example:
John Henry was offered a remuneration package of $55,000 per annum, made up of $48,000 earnings base (salary) and $7,000 superannuation.
John renegotiated his package to $45,000 earnings base (salary) and $10,000 salary sacrifice – superannuation.
John’s PAYG is calculated on $45,000 per year. The employer’s contribution is $10,000 per year, which is greater than the company’s 9.5% contribution to superannuation ($45,000 x 9.5% = $4,275). The employer does not have to make any other superannuation contributions for John.
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Topic: 14165
