Superannuation Salary Sacrifice Taxing Question

[Ryan C]

Hi All,

Recently I asked my accountant about salary sacrificing my bonuses into my SMSF, keeping contributions below the $30k total limit for the year.

He advised against it, explaining it cumulatively gets taxed more than 15% (as much as 30%).

He said my contributions would be taxed 15% when my employer pays into my super and that as the contribution is considered earnings/income for my super it is taxed 15% again.

Is this right or wrong? Can anybody explain how exactly contributions into super are taxed?

Thanks in advance.

 

[rnr]

Hi All,

Recently I asked my accountant about salary sacrificing my bonuses into my SMSF, keeping contributions below the $30k total limit for the year.

He advised against it, explaining it cumulatively gets taxed more than 15% (as much as 30%).

He said my contributions would be taxed 15% when my employer pays into my super and that as the contribution is considered earnings/income for my super it is taxed 15% again.

Is this right or wrong? Can anybody explain how exactly contributions into super are taxed?

Thanks in advance.

This link Salary Sacrificing Super - ATO should answer most of your questions.

 

[sydboy007]

Hi All,

Recently I asked my accountant about salary sacrificing my bonuses into my SMSF, keeping contributions below the $30k total limit for the year.

He advised against it, explaining it cumulatively gets taxed more than 15% (as much as 30%).

He said my contributions would be taxed 15% when my employer pays into my super and that as the contribution is considered earnings/income for my super it is taxed 15% again.

Is this right or wrong? Can anybody explain how exactly contributions into super are taxed?

Thanks in advance.

What they said is a bit misleading.

You will be taxed at 15% on the initial contribution.

Any earnings will then be taxed at 15%.

That compares to say paying tax at marginal rates of say 32.5 / 37 / 45% + 2% medicare levy with any earnings also at the marginal rate.

The only difference really is the rate of taxation rather than the way it is taxed, and the fact you're money is locked in for decades.

 

[Sir Burr]

and the fact you're money is locked in for decades.

That's a bit misleading too

 

[ROE]

Hi All,

Recently I asked my accountant about salary sacrificing my bonuses into my SMSF, keeping contributions below the $30k total limit for the year.

He advised against it, explaining it cumulatively gets taxed more than 15% (as much as 30%).

He said my contributions would be taxed 15% when my employer pays into my super and that as the contribution is considered earnings/income for my super it is taxed 15% again.

Is this right or wrong? Can anybody explain how exactly contributions into super are taxed?

Thanks in advance.

you need a new accountant

 

[Ryan C]

you need a new accountant

Haha I thought the same thing or at least get a second opinion

 

[ROE]

Haha I thought the same thing or at least get a second opinion

if you are on 30% tax bracket by salary sacrificed into super you effective earn your first leg return 1.5K tax free subsequent earning is only tax at 15% tax not counting dividend franking benefits so the benefits is huge.

Here is an example

say you salary sacrificed 10K into super each year and assume your tax bracket is 30%, the higher the tax bracket the better off you are as long as it is not under 15% ...

10K on 30% tax bracket you bring home 7K in hand
10K throw in super after paying tax you have 8.5K

compared to cash in hand you are 1.5K better off and so effectively 21% return tax free first year.
because to get 7K to 8.5K its 21%

you now put this 8.5K to work and assume you get 8% return ... 4% in dividend and 4% from capital gain
you end up with $680 with $112 in franking credit...assume you don't cash out and just collect dividend
you get back an extra 15% of $112 through tax system.

compared to money in hand you get $560 (7K x 8%) and that is it, no franking credit to offset

clearly the super vehicle is far far better and your accountant doesn't see that?

and the longer it goes you get richer faster in Super.

The only down size is the money is not available to you until you retire, but if you are saving for retirement what the point of touching the cash anyway? it defeat the purpose of saving for retirement

 

[Wysiwyg]

In the context of salary sacrifice, does anyone know if deductions are taken from Total Gross or Tax Gross please?

E.g.

Total Gross = 100000
Superann. Salary Sacrifice = 10000
Tax Gross = 90000