How 1 July tax cuts could supercharge your super
May 9, 2024
Want to supercharge your retirement savings? The upcoming 1 July (so-called Stage 3) income tax cuts will see most Australians get an increase in their take home pay.
This may be an ideal opportunity to top up your super without any reduction in your current take home pay.
This 'gain without pain' strategy involves salary sacrificing, rather than pocketing, the extra cash you’ll receive after 1 July when the tax cuts take place.
Why salary sacrifice?
Salary sacrifice is a contribution you make to your super from your pre-tax pay. It’s easy to set up and lets you boost your super directly from your pay. It can also deliver an attractive tax break.
By making pre-tax contributions into your super account, you could save on tax by reducing your taxable income. Pre-tax contributions, also referred to as concessional contributions, are taxed at 15%* once they’re in your super account which can be lower than your marginal tax rate.
Salary sacrificing into super is particularly attractive for anyone earning more than $45,000 per year, as it can help you pay less tax and reduce your taxable income. It is less attractive for those on taxable incomes below $45,000 who pay a lower income tax rate and therefore the tax savings by contributing to super are minimal.
* If your salary package is less than $250,000 per year.Making the most of the 1 July tax cuts
We've crunched the numbers to see how the strategy of salary sacrificing the extra pay you’ll receive after 1 July could work to build wealth while keeping your take home pay at its current level.
As you can see from the table below, the extra cash is around $2,179 (about $42 a week) to $3,379 (about $63 a week) depending on your income level.
Now let’s take the hypothetical example of Mary, a part-time marketing specialist, earning $80,000 a year, and see how Mary could boost her retirement savings - and pay less tax - by using the extra money to top up her super.
From 1 July, Mary’s pre-tax income will increase by about $2,469 as a result of the tax cuts. If Mary salary sacrifices this amount into her super every year for the next 22 years, she could potentially retire at age 67 with an additional $109,385 in her retirement savings.
As Mary’s extra income is being salary sacrificed into super, the tax rate on this amount is 15%, rather than her marginal tax rate. Alternatively, if Mary decides to pocket the extra cash, her annual (after-tax) take home pay will increase by only $1,679, as the extra $2,469 before-tax pay will be taxed at Mary’s marginal income tax rate of 30%, with $780 paid in tax.
By salary sacrificing into super, Mary is not only supercharging her retirement savings, but she is also paying less tax and therefore capturing more of the benefit of her pay increase.
The potential benefit of using the extra pay from the 1 July tax cuts to top up your super
| Salary | Salary Sac amount before take-home pay is affected | Extra super at retirement** | Take-home pay increase post 1 July with no salary sac |
| $80,000 | $2469 | $109,385 | $1679 |
| $100,000 | $3204 | $141,959 | $2179 |
| $120,000 | $3940 | $174,533 | $2679 |
| $140,000 | $5,999 | $265,762 | $3729 |
| $150,000 | $6113 | $270,818 | $3729 |
| $160,000 | $6113 | $270,818 | $3729 |
| $180,000 | $6113 | $270,818 | $3729 |
How to salary sacrifice
Once you know how much you’d like to deduct from your pre-tax salary contact your payroll team. If you are a Telstra employee, you can simply nominate an amount through Workday.
Know your limit
There is a limit on the amount of pre-tax contributions you can make to your super and if you go over, you may have to pay extra tax.
You can find out how much you have left of your contribution cap for the year by logging into SuperOnline. Alternatively, you can give us a call on 1300 033 166 and we can help you.
View pre-tax contribution limits
Things to consider
If you’re a low or middle income earner, post-tax contributions might be a better option as you could be eligible for a government co-contribution.
And some people may be at a stage of life, where topping up their super may not be the best option. Consider getting financial advice before deciding if a salary sacrifice arrangement is for you.
Need some help?
At TelstraSuper we're here to help you build a brighter financial future. TelstraSuper Financial Planning has a team of phone-based Advisers who can provide you with simple advice to help you get your super on track. If you’d like to discuss growing your super or if you have any other financial advice queries, contact us on 1300 033 166 or fill in our online contact form. There's no additional cost for our phone-based advice as this is included in your TelstraSuper membership.*
* This is general and simple personal advice about your TelstraSuper account over the phone. Simple personal advice is advice about contributions, investment choice and insurance cover within your TelstraSuper account.