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Re: How will I be taxed on salary sacrifice?

Initiate

Views 1041

Replies 6

Dear ATO,

I would like to start salary sacrificing into my superannuation fund. I am aiming to reach $15, 000 as soon as possible and am willing to sacrifice a large portion of my salary in order to do this. I understand that I will be paying 15% tax on my sacrificed funds and that the concessional contributions cap is $25, 000 (about $480 a week) and that all concessional contributions over this amount will be taxed at a higher rate. I am wondering if I sacrifice $600 a week for 25 weeks to reach $15, 000, will I only pay the 15% tax? Or is the tax paid weekly similarly to income tax? If this is the case, will I get the extra tax I paid on my salary sacrificed funds back in my tax return? Thank you.

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Accepted Solutions

Most helpful response

Taxicorn Registered Tax Practitioner

Replies 0

 Will just a 15% tax rate be applied to those $600 contributions

Yes

 

or will it be considered over the concessional contributions cap because $600 a week is over $30, 000 for the year.

No  -  excess contributions are determined by ATO after year end, not by super fund.

 

 

 

6 REPLIES 6

Taxicorn

Replies 0

@camsook 

 

Each contribution will be taxed by the super fund when it is deposited.

 

The $25,000 cap will also include your compulsory 9.5% one that work pays.

 

The $25,000 cap will also have unused portions from 2019 & 2020 rolled into it.

 

You do not get the tax back in your tax return.

 

 

Taxicorn Registered Tax Practitioner

Replies 3

 I am wondering if I sacrifice $600 a week for 25 weeks to reach $15, 000, will I only pay the 15% tax? 

 

Not exactly  -  your super fund will pay 15% tax on the contributions.

 

Or is the tax paid weekly similarly to income tax? If this is the case, will I get the extra tax I paid on my salary sacrificed funds back in my tax return?

 

Your payroll total will just be that much less at the end of the year, and so will tax deducted.

The super amount in excess of 9.5% of you pre-sacrifice gross will show as "reportable super" on your tax return.

If you salary sacrifice evenly thru the whole year, there will be no affect on you tax refund at year end.

Salary sacrificing for part of the year may result in a slightly better refund at year end   -  similar to result if you work overtime for half the year only.

 

You need to make sure that you do not sacrifice down below the tax-free threshold, otherwise yout total tax ( payroll + yax on super) will be higher than it should be. 

 

Best to get pay office to explain how it will impact your particular situation before you make a commitment.

 

Initiate

Replies 2

Sorry, I don’t think my question was very clear. I will try to use some figures to make it easier. I earn $1, 500 gross weekly and want to salary sacrifice $600 into my superannuation fund for 25 weeks. Will just a 15% tax rate be applied to those $600 contributions or will it be considered over the concessional contributions cap because $600 a week is over $30, 000 for the year. I am asking because although I will be sacrificing $600, because it is only for 25 weeks the total for the financial year will only be $15, 000 + my super guarantee paid by my employer. This would be under the concessional contributions cap. I hope these figures make the question clearer for you. Thanks

Most helpful response

Taxicorn Registered Tax Practitioner

Replies 0

 Will just a 15% tax rate be applied to those $600 contributions

Yes

 

or will it be considered over the concessional contributions cap because $600 a week is over $30, 000 for the year.

No  -  excess contributions are determined by ATO after year end, not by super fund.

 

 

 

Initiate

Replies 0

 

Hoping I have understood your question...

 

The superfund will normally only withold tax at 15% on a per receipt basis, they don't calculate it as a percentage of a projected annual total (because when they get it  -  they cannot know whether it's a one-off payment or an ongoing payment, and they also cannot know if you have put anything into another fund somewhere else that year)

 

It's the ATO that monitors if you're over your cap or not

 

The actual reconcilliation of all contributions doesn't ordinarily occur until the tax return is lodged - 

If your annual total exceeds the available cap (remembering this is now a rolling total over a potential 5 years) you get an excess contributions notice with your assessment - you then get various options of whether to leave the over-payment in your fund ( and pay the extra tax) or have it released and shown as taxable income on your return ( and pay the tax on it ! )

 

https://www.ato.gov.au/individuals/super/growing-your-super/adding-to-your-super/tax-on-contribution...  

 

"IMHO Smiley Happy - definitely not ATO certified information!"

 

Devotee

Replies 0

Hi camsook

 

The answers that have been provided are correct.

 

As has been noted, any contributions being paid by your employer also count towards the $25,000 concessional cap, so you'll need to factor that in when deciding how much to salary sacrifice.

 

As others have said, the ATO determines after the end of the financial year if someone has gone over the $25,000 cap, and applies the extra tax if needed. As an example - someone could make a $50,000 concessional contribution on 1 July, the fund would withhold 15% tax. More than 12 months later the ATO would determine that the cap for the year has been exceeded and the excess amount would be taxed at the person's marginal tax rate (less 15%, as the fund has already paid 15% tax on the excess amount.)

 

As has also been noted - where someone has a total super balance of less than $500,000 the $25,000 cap is increased by any unused cap space since the 2018-19 year. So if in 2018-19 and 2019-20 there were no employer contributions paid for you, and you didn't salary sacrifice anything, there'd be a cap of $75,000 in the 2020-21 year.

 

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