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Salary sacrifice amounts need review

super guarantee salary sacrifice

Unadjusted salary sacrifice amounts could result in breaches of the concessional contribution cap due to the recent increase to the SG.

A technical specialist has recommended SMSF advisers review any salary sacrifice arrangements their SMSF clients had in place prior to 1 July 2022, given the increase to the superannuation guarantee (SG) levy in the new financial year, in order to avoid breaching the concessional contributions cap.

“The super guarantee rate has jumped to 10.5 per cent and that means for somebody, regardless of what they are earning, they are going to be receiving higher employer contributions than they received last financial year,” SuperGuardian education manager Tim Miller told attendees of a technical webinar held today.

“What that is going to mean for those that do salary sacrifice is they need to reduce that salary sacrifice amount down if they were already salary sacrificing a fixed amount to take them up to the $27,500 for the year, because we have not [had] any indexation on the concessional contribution caps.”

Miller pointed out it could take several years before indexation is applied again to the concessional contributions cap, meaning a salary sacrifice adjustment now could remain effective for longer than just the immediate term.

“So we need to take that into consideration because we don’t want to end up with excess concessional contributions and then paying marginal tax on those amounts if we can help it,” he noted.

“It is the nuisance of having to deal with the regulator and potentially either withdraw those monies from the super fund via the tax system or have them treated as non-concessional contributions, which then may impact any non-concessional contribution planning.

“So now is the time that if our clients are engaging in salary sacrifice practices, to make sure that they’re in line with the contribution caps.”

Indexation was applied to the concessional contributions cap on 1 July 2021, raising it from $25,000 a year to the current annual level of $27,500.

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