What is salary sacrifice?

Salary sacrifice is an arrangement between you and your employer where you agree to forego part of your future salary or wages in return for your employer providing benefits of a similar value.

Benefits of salary sacrificing superIf you make super contributions under a salary sacrifice arrangement, there are typically benefits for both you and your employer.

These include:

• Reduction in your assessable income  - The part of your salary you sacrifice into super is not assessable income for taxation purposes. It is not included as income on your payment summary and is not subject to pay as you go (PAYG) withholding tax. However, from 1 July 2009 salary sacrifice contributions will be included in the income test to determine if you are eligible for the Government co-contribution and some other government concessional benefits.
• Concessional tax benefits in the fund - If you make super contributions through a salary sacrifice arrangement, please note that the concessional tax treatment is limited to a set amount of contributions made each income year.
• No fringe benefits tax - When salary sacrificed super contributions are made to a complying super fund like VISSF, the sacrificed amount is not considered a fringe benefit for tax purposes. Salary sacrificed contributions are treated as employer contributions.
• Deductibility for your employer - If you are under 75 years of age, your employer can usually claim a tax deduction on the amount of salary sacrificed contributions they contribute to your super fund on your behalf.