Phil Joel
Phil Joel Director at SavvySME

Asked this question on 19/6/13 -Finance and Accounting

How to reduce taxable income with superannuation contribution?

Hi, It's that time of the year where PAYG employees are looking at ways to reduce their taxable income.

My questions are:

1. What is the limit for Super Contribution in FY2013? Is it still $25,000?

2. As a working an example, let's say an employee is paid $60,000 as a salary, could he / she nominate for his Super contribution to be $25,000 instead of the legislated 9% contribution (or $5,400). By doing this, would he / she reduce his taxable income to be $35,000?

3. Would the employer of this person be adversely affected by the above working example?

Top voted answer
Shane Gold

Shane Gold Compliance Officer at First State Super

Top 30% Superannuation

Phil,

The concessional contribution cap for 2013 financial year is $25K. From 1/7/2013, this cap increases to $35K for people over 60 and from 1/7/2014 for people over 50. From 1/7/2018, everyone will be able to contribute $35K regardless of age.

From 1/7/2013, the compulsory SG is 9.25%. Based on the example and assuming you’re under 60, you can put in $25K where the amount above the 9.25% SG will be treated as salary sacrifice which is  arranged between the employer and employee. The total $25K will be taxed at 15% and the reduced income of $35K will be taxed at the individual’s marginal tax rate.

There is no adverse impact on the employer for allowing employees to salary sacrifice that I am aware off. In fact, the employer may be able to claim a tax deduction on the SG and salary sacrificed contributions. 

Cheers Shane

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