How much can I salary sacrifice into my super fund?

According to the Australian Taxation Office (ATO), concessional contributions are contributions that are made into your super from your pre-tax money. This includes:

• The superannuation guarantee or the compulsory super your employer pays for you
• Any super payments you make through a salary sacrifice arrangement
• Any personal contributions made from your take-home pay for which you have claimed a tax deduction

Concessional contributions or pre-tax contributions can qualify for a concessional or lower tax rate, which is currently 15 per cent. However, to qualify for the lower tax rate, the sum of these contributions should not exceed the concessional contributions cap set at $27,500 . However, this cap could change from time to time, and you can visit the ATO website for the latest figure.

Interestingly, your concessional contribution cap in a financial year could be higher than the fixed cap stipulated by the ATO. The ATO allows you to carry forward the “unused cap”, meaning the further concessional contribution you could have made in a financial year but did not, perhaps due to a period of unemployment. 

Accordingly, you can calculate the cap available to you based on the contributions made in the last five financial years, including the current year. However, if your total super fund balance at the end of the immediately previous financial year exceeded $500,000, you would not qualify for carrying forward the unused balance for the current year. 
Suppose your concessional contributions for 2021-2022 totalled $20,000 and your super fund balance on 30 June 2022 was $400,000. Your concessional contributions cap for 2022-2023 would amount to $35,000, the sum of the current year cap of $27,500 and the carried-forward cap of $7,500 from 2021-2022. You should also remember that concessional contributions above the cap are considered non-concessional contributions and taxed at a higher rate. 

A salary-sacrificing arrangement for contributing to your super fund lowers the portion of your income taxed at the marginal rate, thus reducing your tax burden. If you keep track of concessional contributions to your super fund, you may also benefit from the tax deduction on the super contribution. Most significantly, you would add to your retirement funds in the process, ensuring a larger sum available for you in your old age.

However, you should ensure that your employer is not claiming a part of your salary-sacrificed contribution as their super guarantee contribution, as they deduct both amounts from your salary and pay the total into your super fund. Further, you have to keep track of your past super contributions - whether through salary sacrifices or personal deposits - and make sure you don’t end up paying extra tax on your super contributions. Also, as the tax is calculated on the amount received in your super fund by the contribution deadlines, you could end up not using your entire cap if the contribution is not deposited by your employer in time.