This article discusses the differences between making pre-tax (salary sacrifice) and post-tax (tax deductible) contributions to super. It uses a case study to explain the potential differences.
Amongst the changes made to superannuation effective 1 July 2017 was the welcome and sensible move to give everyone who makes a personal contribution to super the option of claiming a tax deduction for it. Prior to this date, tax deductions on personal contributions could only be claimed by the “substantially self-employed”.
The upshot is that, if you are an employee, there are now two ways in which you can optimise the tax-effectiveness of your additional super contributions:
• opt for a salary sacrifice arrangement, whereby your employer makes additional superannuation contributions beyond the compulsory superannuation guarantee (SG) amount from your pre-tax earnings and reduces your salary accordingly; or • make a personal contribution and claim a tax deduction when you submit your tax return.
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