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Phil Joel
Phil Joel, Director at SavvySME

Finance and accounting

How do I reduce taxable income through 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?

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1 Answer

Shane Gold

Shane Gold , Compliance Officer at First State Super

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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