Are you looking for a great way to boost your retirement savings and save on your tax bill at the same time? Salary sacrificing some of your pre-tax earnings into super can be a great way to achieve both results.
Even better, salary sacrifice can help you achieve a level of retirement savings that will mean you can enjoy your lifestyle long after you stop working. Here’s our guide to salary sacrifice.

What is salary sacrifice?
Salary sacrifice involves asking your employer to make pre-tax contributions from your salary into your super. The short-term result is that you will receive less take-home income because it has been sacrificed into your super. However, the pay-off is two-fold.

Firstly, provided that your marginal tax rate is more than 15 per cent, salary sacrificing will result in an immediate reduction to the total amount of tax you pay. This is because this type of super contribution is generally taxed at 15 per cent.

Secondly, because of the tax saving, you’re able to inject more funds into your super fund. This means your fund will be immediately boosted and, over the coming years, will provide compound benefits on the money it invests.

Meet Sarah
Sarah, aged 40, works as an IT professional in Brisbane and currently earns $90,000 per annum. In addition to this income, she earns $5,000 per annum from a small but growing share portfolio.
While her employer already contributes the 9 per cent super guarantee, Sarah decides to salary sacrifice an additional $10,000 of her gross income into super.
By sacrificing $10,000 into super, Sarah’s super fund is boosted by $8,500 (after contributions tax of 15 per cent is deducted). While Sarah’s take-home income is reduced by $5,850, the overall benefit from the tax saving she receives is $2,650.
It should also be noted that salary sacrifice may not be available to low income earners and those paid on the award wage. Your employer also needs to endorse your salary sacrifice activity. And of course, you should always check that this strategy is right for your personal circumstances before going ahead.

If you need some advice on boosting your retirement savings and saving tax, give ipac a call on 1800 626 881 today to arrange a no-obligation appointment with a professional financial adviser.