# Salary Sacrifice Question



## carmo (7 February 2007)

If I was to Salary Sac my complete pay for the complete financial year, would my group certificate read zero?


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## Dr Doom (7 February 2007)

Carmo,
My employer has set a percentage limit of my gross that I may SS. Not sure if this is Government impost  or employer requirement, so I doubt if you could SS your entire salary. Get professional advice?..


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## Prospector (7 February 2007)

Interesting idea!  I dont think there is any 'legal' limit on SS for Super but if you could, assuming you dont have any FBT or anything, I guess your certificate would be zero!  I am betting as soon as the new Super Legislation comes in then people will be doing as much of this as possible.


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## son of baglimit (7 February 2007)

u can, but there are limits - and if u r doing it to avoid hecs, medicare, centrelink income tests etc, dont bother, as FBT is considered income for those purposes.

go to ato.gov.au and use search


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## carmo (7 February 2007)

Maybe I need to put it another way, if I grossed $50,000, but sal saced $10,000, would my group certificate read $40,000?


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## son of baglimit (7 February 2007)

yes - $40k income, $10k fbt


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## CanOz (7 February 2007)

After July 01 the maximum for salary sac is 50k per year.

What is it now?

Cheers,


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## Judd (7 February 2007)

son of baglimit said:
			
		

> yes - $40k income, $10k fbt




Salary Sacrifice to superannuation does not attract Fringe Benefits Tax.  It does attract the 15% contributions tax but that is paid by the fund net of any franking credits etc.

From 1/7/07 the Limits are:

$150k per year per person from after tax income (or $450k over three years).  No apparent indexation of this amount

$50k per year in pre-tax (ie, salary sacrifice).  This $50k also includes the 9% Super Guarantee Charge that your employer is required to pay.  the $50 is indexed in $5k increments, ie it will be $50k until the indexed calculations reach $55k, etc.  That could take about 3 years at 4% per year (Average Wage Ordinary Times Earnings.)

Do know of one person who salary sacrifices his entire pay as he has a swag of dividend income from shares.  It ain't me.  Don't know what he is going to do after 1/7 because I understand that he is on way more than $50k per year.

Current arrangements means you can put as much as you like into super, either pre-tax or on an after tax basis.  However, if you do not receive employer superannuation, you can only get a tax deduction on after tax contributions and there are age-based contribution limits .  These are:

Under 35:  $15,260
35-49:  $42,385
50 and over  $105,113


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## Judd (7 February 2007)

In addition:

If you salary sacrifice, unless the terms of your employer contract are very, very clear, it may mean that your employer effectively puts in nothing and you pay the 9%.  Salary sacrifice is to considered to be an employer contribution so if you are on say $100k and you decide to sacrifice $50k, then the employer is not going to put in any more.  Even if you put in $41k expecting that the employer will pay another $9k, (9% of $100k) that may not be true as your employment contract may stipulate that the 9% is based on your taxable pay, ie $59,000, which means only $5,310 goes in.

Make sure you check everything, and I mean everything, out thoroughly.


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## carmo (9 February 2007)

Can anyone tell me the diference between an "effective" agreement and a "not effective" agreement?


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## Garpal Gumnut (10 February 2007)

Judd said:
			
		

> In addition:
> 
> If you salary sacrifice, unless the terms of your employer contract are very, very clear, it may mean that your employer effectively puts in nothing and you pay the 9%.  Salary sacrifice is to considered to be an employer contribution so if you are on say $100k and you decide to sacrifice $50k, then the employer is not going to put in any more.  Even if you put in $41k expecting that the employer will pay another $9k, (9% of $100k) that may not be true as your employment contract may stipulate that the 9% is based on your taxable pay, ie $59,000, which means only $5,310 goes in.
> 
> Make sure you check everything, and I mean everything, out thoroughly.




This is going to be an interesting thread, I've never been able to understand this, so roll on anyone who can contribute. Garpal


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## Bomba (10 February 2007)

Judd is correct.  If you salary sacrifice more than 9% of your salary you are effectively discharging the employer's obligation to SGC.

If you are on $100k, you should check with your employer if you salary sacrifice$10k if they will pay SGC on $100k, or SGC on $90k. 

If you are with a good employer they will be willing to pay SGC on $100k, if ure not, then legally they only have to pay SGC on $90k.


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## PennyHopeful (10 February 2007)

Bomba im not sure that this is entirely correct. If your on 100k a year and you salary sacrifice 10k your employer effectively has no obligation as the 9% has been met. Obviously how this will be dealt with is determined by individual contracts. Below is an exert from the ato website.

*Can I salary sacrifice superannuation contributions? * 

Yes. Salary sacrifice is an arrangement by which you agree to give up part of your future salary or wages if your employer provides benefits of a similar value. A contractual agreement with your employer to alter your salary package by exchanging part of your future salary or wages for another benefit is called a ‘salary sacrifice arrangement’. 

Salary or wages can be sacrificed into a variety of benefits including superannuation. 

Under a salary sacrifice arrangement for superannuation: 

you can increase your superannuation benefits and reduce your assessable income by an amount similar to the sacrificed amount (some employers take a portion of the amount for administration expenses), and 
your employer can obtain a tax deduction for the increased superannuation contributions (subject to employee age-based limits). 
There is no limit on the benefits that you can sacrifice if there is no limit in your relevant industrial law, award, workplace or similar agreement. 


 The Government has announced changes that may impact salary sacrifice arrangements. If these changes pass, they will apply from 1 July 2007.




 Salary sacrificed contributions are paid as employer contributions to a complying superannuation fund. 



Because your employer pays the salary sacrificed contributions on your behalf, those contributions can count towards the 9% employer contributions required to meet the superannuation guarantee. 

For this reason, make sure that all the terms of the arrangement are fully and clearly documented. 

Example

Susan is about to start a new full-time job and was offered a remuneration package of $50,000 a year including superannuation ($45,000 base earnings and $5,000 superannuation). 

Instead of accepting the original terms of the offer, Susan negotiated an effective salary sacrifice arrangement for superannuation with her employer, requesting that 

$10,000 of her remuneration package be contributed to her complying superannuation fund, and 
$40,000 be paid to her as salary and wages. 
Under this salary sacrifice arrangement:

Susan’s employer could claim a $10,000 tax deduction for the superannuation contribution (rather than a $5,000 tax deduction under the original remuneration offer). The amount of the deduction is subject to employee age-based limits 
the salary sacrifice portion (the $10,000 superannuation contribution) would not be treated as part of Susan’s assessable income, so she would not have to pay income tax on this amount 
Susan’s income for taxation purposes would be reduced to $40,000 (rather than $45,000 before she negotiated a salary sacrifice arrangement) 
the superannuation contributions would be considered to be employer contributions, therefore taxed in the superannuation fund, and 
the contributions could be counted towards the superannuation contributions that the employer is required to pay on behalf of Susan.


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## Bomba (11 February 2007)

> Bomba im not sure that this is entirely correct. If your on 100k a year and you salary sacrifice 10k your employer effectively has no obligation as the 9% has been met.




That is what im trying to say.

Sorry if it has not come out right.


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## Garpal Gumnut (12 February 2007)

Does anyone know whether one can salary sacrifice with a new employer if one has reached the limit for ss with one's previous employer. I'm talking about Govt. and Charitable employers entitled to allow one to ss to approx $17000 pa, so if I work for 2 such employers in the same fbt year can I ss to $34000. 

Yours in hope more than reality

Garpal


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## reece55 (12 February 2007)

Garpal
If you are referring to the FBT exemptions for PBI's (public benevolent institutions) and hospitals, etc. , then I believe that you would be able to have 2 limits here. The FBT legislation places this onus on the employer, so if you were working with 2 employers who were entitled to the exemption, you should be entitled to 2 FBT free limits, so to speak. This is my understanding, but it would probably require a bit more research.....

have a look here if interested!

http://www.austlii.edu.au/au/legis/cth/consol_act/fbtaa1986312/

Cheers


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## Garpal Gumnut (13 February 2007)

reece55 said:
			
		

> Garpal
> If you are referring to the FBT exemptions for PBI's (public benevolent institutions) and hospitals, etc. , then I believe that you would be able to have 2 limits here. The FBT legislation places this onus on the employer, so if you were working with 2 employers who were entitled to the exemption, you should be entitled to 2 FBT free limits, so to speak. This is my understanding, but it would probably require a bit more research.....
> 
> have a look here if interested!
> ...




Thanks mate,

I'll check it out

Garpal


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## Judd (13 February 2007)

Does not appear to be anything stop salary sacrifice arrangements with two or more employers.  Just be aware that the super surcharge has effectively been re-introduced because under the proposals, contributions above the new $50,000 all-age threshold will be taxed at the highest marginal rate.  That $50k is combined from all sources.

Also large undeducted contributions and the withdraw and re-contribution strategy above $150,000 is dead to a great degree because undeducted contributions are now restricted to $150,000. Contributions above this $150,000 will be taxed at the highest marginal rate and will be returned to the investor. However a three year averaging provisions apparently apply.

Note that unless you provide the fund, and this could include a SMSF: yes, I know it is a stupid concept in that regard, with your Tax File Number, contributions will be taxed at the highest marginal rate and you only have a window of, I think, five years to claim that additional tax back.


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