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Salary sacrificing into your super

Salary sacrificing part of your income into your superannuation brings about a lot of financial benefits. Employers in Australia are required to contribute the equivalent of 9.5% of an employee’s salary into a nominated superannuation fund. On top of these contributions, employees can request that their employer reduce their salary and direct the additional cash into their superannuation.

There are a number of benefit to salary sacrificing into your superannuation:

1. Reduce your tax liability: Superannuation contributions are taxed at the low rate of 15% (or 30% for individuals earning over $300 000). Therefore, by making additional contributions from your before-tax income, you are likely to decrease your overall tax liability.

2. It won’t cost your employer anything: Your employer will not have to pay any fringe benefits tax on your additional superannuation contributions, so it shouldn’t be an issue for you to make an arrangement.

3. Compound interest! The more that you contribute to your superannuation early in life, the harder your money will work for you. Even a very small additional contribution each week when you’re young can make a big difference to the final size of your nest egg.

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Tax on super death benefits for dependants vs non-dependants

July 9, 2020

A super death benefit is the super paid after a person’s death, usually to a nominated beneficiary. These benefits are subject to different tax treatments, depending on whether the beneficiaries are dependant or non-dependant.

Superannuation death benefits will generally be received tax-free by tax dependants, who are considered to be:

Dependants will not have to pay tax on the tax-free component of their super in the event that they:

However, they will be taxed at their marginal rate if they receive a capped benefit income stream and:

Not all super death benefits are subject to tax; for non-dependants, there is a taxable portion. This component is largely made up of after-tax super contributions that the deceased member has made.

Super death benefit payments are subject to tax when:

Non-dependants must calculate how much money in the super account is a:

The amount of tax non-dependants pay will be based on their marginal tax rate, however, this amount may be reduced by tax offsets. For the taxed element of the taxable component, the effective tax rate is your marginal tax rate of 17% (whichever is lower). For the untaxed element of the taxable component, the effective tax rate is 32% or your marginal tax rate (whichever is lower).