Salary sacrificing is the arrangement between you and your employer where you agree to forgo some of your take home pay. In return, you can use this money elsewhere. When it comes to employee benefits, there are plenty out there that you could benefit from as a newbie in the workplace. Some jobs like government or north profit jobs can offer the option of salary sacrificing and it's one of the ways that you can either contribute to your super or you can contribute to your after tax payments. Salary sacrificing is one of the options that helps you to increase your superannuation contributions if you want to use it that way. When it comes to retirement savings, doing what you can when you are young is important so that you can access the money and have it work for you when you're older. In this article, we look at some of the benefits the concept of salary sacrificing might bring.
By Team Savant
Image: S. Tsuchiya
Some people choose to load it onto an entertainment card so that they can get their groceries for a tax free amount. Others choose to use it for their superannuation. Then there are others who toss up the difference between salary sacrifice vs company car. Employee benefits come in many styles, but salary sacrifice is one of the good ones if you're looking to benefit from fringe benefits. You get around $15 to $18,000 in tax free benefits that you can use so that your income is balanced out and you end up with a lot from your employer.
Understanding what salary can be sacrificed is how you can decide whether it's for you. It's always a good idea to talk to your employer and your HR department to see if they offer the right super options or if they offer entertainment cards or even a company car to work with. If you're being offered a company car, then it doesn't make sense to sacrifice a car if you can use one on the company's dime. Some of the other ways that you can use salary sacrifice include the following.
Fringe benefits. You can use this to pay for a car, school or childcare costs, any loan repayments, and your employer will then have to pay the fringe benefits tax on your behalf so that you still benefit but not have to pay the tax on top.
Work related items. There are some items that are exempt from the fringe benefits tax and these are work related items. These can include tablets, software, tools for work, work related clothing and laptops. Basically anything that you have to use on the road for your job but you want to be able to keep, you can make a salary sacrifice.
Your superannuation. At some point in your retirement, you're going to need your super to help you to get through those retirement years. Salary sacrifice contributions to super are free from the fringe benefits tax as long as the contributions are paid into a compliance super fund. You can check with your employer to see whether your current superannuation fund is able to receive these payments. You can currently pay up to $27,500 into your super from your pre tax salary. So you can make sure that you are paying more into your salaries and your super in the future with salary sacrifice. You can contribute up to $110,000 a year from your post tax salary to your super, but that's again something that you have to consider yourself and talk to your super fund about. You want to be able to make voluntary contributions where you can to improve your super amount.
A new car. Whether you use the car for work or not, you can salary sacrifice a car and you have the latest and greatest model electric car for you and your family to use. A salary sacrificed car often has the cost of the car, the insurance and the petrol all covered under the salary sacrifice scheme. You end up with a petrol card with a certain amount of money on it that you can top up each month and of course if you need to top up more petrol. You can do that out of your own pocket.
Every employer has different salary sacrifice arrangements, so you need to determine whether it's right for you by discussing it with your employer and your HR department. Always do your research and seek their professional advice that you need to determine whether it's right for you. If you are in the position to make extra contributions to your super, salary sacrificing is a great option.