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Bigger Tax Refund if I Salary Sacrifice?

July 24, 2023

Will I get a bigger refund if I salary sacrifice?  The short answer to this is NO.  The long answer is NO too.  But there are tax savings to be had.

Does Salary Sacrificing affect your tax returns

When you salary sacrifice something from your wages (such as super) you use pre-tax dollars.  This means that you are saving tax during the year when you get paid, rather than getting a bigger refund when you lodge your e-tax return.

For example:

Let’s say your normal take home is $1,000 per week.  So, your gross wage per week is around $1,278 and your tax is $278 per week.  You decide you want to put an extra $100 per week into your super.

Your new weekly gross income is $1,178 ($1,278 less $100 super contribution).  Your weekly tax is now $242, and your new take home pay is $936. 

Your take home pay has gone down by $64, even though you have put an extra $100 into your super.  The difference is your weekly tax saving of $36.

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 Without getting too technical, your super fund will pay tax of $15 on your $100 contribution but you don’t really notice it on a weekly basis.

Alternatively, the tax law has changed recently where you can claim a deduction for any super contributions you make with your after-tax money.  This will increase your tax refund as you are not getting any tax savings during the year.  If this sounds good, then read our blog about claiming your super as a tax deduction.

It’s always good to get further advice before you decide to do salary sacrifice.

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Note that the information provided is general in nature and subject to change, please contact one of our professionals who can evaluate your circumstances and provide more accurate advice to your current situation.

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