Transitioning to Retirement – Salary Sacrificing into Super

Salary sacrificing into your superannuation involves reducing your take-home pay to put more money away for your retirement.

Salary sacrificing into super is where you choose to place a portion of your before-tax income into your superannuation account by your employer. This contribution is in addition to the 10% super guarantee amount that your employer must pay you.

Why should you salary sacrifice to super?

Although making salary sacrifice contributions does decrease your take-home pay, it does help boost your retirement savings while also potentially minimising your tax bill. If you’re thinking about setting up a salary sacrifice arrangement, here are some things to consider.

Can I withdraw any of my super before retirement? If so, when?

It is possible to start withdrawing your superannuation benefits as an income stream without retiring. This can be done to supplement your income during a low-income year or as part of a salary sacrificing arrangement.

The only conditions on the establishment of this type of income stream is that you have reached your preservation age and not “Retired”. Your preservation age is between 55 and 60, depending on your date of birth.

The potential advantages of establishing this type of pension are:

  • A tax rebate of 15% is available for personal pension withdrawals.
  • Once you turn 60 the pension payments are not taxable on withdrawal
  • Your current salary can be sacrificed as a superannuation contribution to maintain your current after-tax income.

How much of my pension am I able to withdraw each year?

If you are taking a transition to retirement income stream, you must withdraw at least a minimum amount each year, which is recalculated each year. There is also a maximum withdrawal limit which cannot be exceeded for the financial year.

And disadvantages?

You need to be aware of the limit on contributions into superannuation. Salary sacrifice contributions are in addition to super guarantee contributions and contributions over the current cap ($27,500) may result in additional tax. And if you are a ‘high income earner’, you could end up paying additional tax on the concessional contributions.

How can Morrows help?

Everyone’s circumstances are different, so if you’re looking for ways to boost your superannuation and would like to consider setting up a salary sacrifice arrangement, please reach out to our Private Wealth or Super teams. Our experienced staff will help you understand the most suitable option for your needs.


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