Using the 1 July tax cuts to boost your super 

16 July 2024

Superannuation

From 1 July 2024, every Australian taxpayer is eligible for a tax cut.

If you earn $60,000 per year before tax, the new tax changes mean you’ll get an extra $22 in your pay packet each week. What would happen if you added some of that extra money to your super? 

We crunched the numbers, and if a person earning $60,000 were to put $10 a week into their super, before it’s taxed as income, they’d still be taking home $16 a week more than they were last financial year thanks to the tax cuts. 

How salary sacrificing into super works

You and your employer can agree on a salary sacrifice arrangement – sometimes this is also called salary packaging or total remuneration packaging. Basically, it means you are agreeing to exchange part of your salary or wages for benefits of a similar value.

You can use a salary sacrifice arrangement to have some of your salary or wages paid into your super fund instead of to you. 

This effectively reduces your taxable income, meaning you pay less tax on your income. As long as you’re putting less than $30,000 a year into your super under this arrangement, your contributions will be classified as concessional contributions

Concessional contributions are taxed in your super fund at a rate of 15%, which is lower than the income tax rates above the tax-free threshold of $18,500. 

Crunching the numbers 

The table below shows how much take home pay and super a person with a before tax salary of $60,000, who did not make any voluntary contributions to super, ended up with last financial year. 

Per year (2023/2024)
Salary
$60,000
Less tax
($11,067)
Take home pay (bank account)
$48,933 (or $941/week)
Super @ 11%
$6,600
Less tax on super 15%*
($990)
Super Account
$5,610

From 1 July 2024, this is what the breakdown looks like thanks to the new tax cuts and the superannuation guarantee rising from 11% to 11.5%.

What’s the superannuation guarantee? It’s the percentage of your wage employers are legally required to pay into your super account.

Per year (2024/2025)
Salary
$60,000
Less tax (new tax rates)
($9,888)
Take home pay (bank account)
$50,112 (or $963/week)
Super @ 11.5%
$6,900
Less tax on super @15%
($1035)
Super account
$5,865 (increased $255 a year)

If a person earning $60,000 a year decided that, in light of the tax cuts, they could afford to salary sacrifice $10 a week into their super this is what their take home pay and super balance would look like. 

Per year (2024/2025)
Salary minus $10/week salary sacrifice
$59,480
Less tax (new tax rates)
($9,714)
Take home pay (bank account)
$49,766 (or $957 a week)
Super @ 11.5%
$6,900
PLUS Salary sacrifice
$520
LESS tax on super 15%*
($1,113)
Super account
(increased by $697 a year)

By salary sacrificing $10 a week into super out of the $22 extra take home pay from the tax cuts, a person earning $60,000 a year could still be taking home $16 per week more than last financial year – and they’d be boosting their super at the same time. 

The total tax, paid on a $60,000 salary is also reduced in this example by almost $100. This is because the salary sacrificed amount of $10 per week incurs a lower rate of tax** within super than it would being taxed as income.

This can be a tax effective way to save, but you must keep in mind that you won’t be able to access that money until you are retirement age, or you meet other super withdrawal criteria.

Making voluntary contributions to super isn’t going to be the right decision for everyone. But if your goal is to grow your balance, it might be worth considering.

Want to know if this could work for you? 

Give our coaches a call on 1300 COACH 0 (1300 262 240)

 

 

*The concessional contribution cap is $30,000 and amounts over this amount will incur additional tax.

Note: These tax calculations do not include the medicare levy.

Source: https://taxcuts.gov.au/