Can I ask if the final total dollar amount that someone had would be greater if they salary sacrificed into super, or if that salary was instead paid to them (as an employee), and they then used those funds paid to them to make a personal super contribution, which they then claimed as a tax deduction?
I ask this because I hear commentators say that making a personal super contribution with a tax deduction has the same net effect as salary sacrificing. However, as far as I can see, it would not have the same net effect, and it would always be better to salary sacrifice. See my workings as follows where someone has earned $10,000:
Salary sacrifice:
- $10,000 salary into super fund.
- $1,500 paid in tax at 15%
→ Remaining balance: $8,500.
Personal deductable contribution: (Marginal tax rate 32% for this example)
- $10,000 salary earned
- $6,800 Net salary after $3200 income tax has been taken out (at a rate of 32%)
- $6,800 is left, which is then sent to Super as a personal contribution
- $1,020 of the $6,800 is paid in super tax at 15%, leaving balance of $5,780.
- A $2,176 tax refund is credited, based on the contribution of $6,800 at 32%.
- Net balance: $7,956 (from $5780 Super balance + $2176 Tax refund).
So, the personal deductable contribution method leaves a balance of $7,956, whereas the salary sacrifice method leaves a balance of $8,500, so these methods do not seem to have the same effect, and someone would appear to always be better off to use the salary sacrifice method.
Let me know if I’m missing something.
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