Updated: Aug 29, 2019
Tax deductions are always an issue of great interest whether or not one is self-employed. Did you know that salary-sacrificing via super today and giving up your money now to super before tax, makes it taxable at only 15%? In the long run, this can save you tax up to the maximum capped contribution amount of $25,000.00 per annum (FY2018/19).
Why should you consider doing so?
Because by doing so, you actually increase your savings for retirement AND reduce the amount taxable to only 15%!
Here is some before-tax contributions that is counted towards the AUD25,000 limit (FY2018/19):
compulsory contributions paid by your current employer
contributions from any previous or other jobs you may have held in the same financial year
contributions you are claiming as an income tax deduction
How do you salary sacrifice? Here's your checklist.
1. Check if your employer allows you to salary sacrifice. Otherwise you may be able to do so by making personal tax deductible super contributions instead.
2. Set the amount and decide how regularly you want it done. Ongoing or one-off.
3. Inform your employer. Make sure you communicate with your company to provide them with the needed information AND get your employer’s approval for the salary sacrifice arrangement.
4. Get it down in writing. Be notified of the deduction in writing and be aware of when it will be done.
5. Do NOT exceed the $25,000 before-salary deduction limit. Check with your Super fund to keep on top of all your contributions. Remember that there is a cap!
With salary sacrificing, you boost yourself for a better retirement in the future and SAVE on tax too!
Need assistance with setting up your salary sacrificing process? Not too sure which applies to you? Perhaps you would like someone to set up, process, review and help you review your payroll procedures and provide you with information on an ongoing basis so you can have peace of mind? Contact us to see how we may be able to assist you with your business finances today.
Justin Wong is the Financial Comrade at PAQ Group. The mission of PAQ Group is to create a stress-free bookkeeping experience and to empower entrepreneurs with financial know-how so they are able to create a more successful business.
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