Salary Sacrifice Optimizer
Find the sweet spot for salary sacrificing to super or a novated lease to maximize your tax savings and overall wealth.
Quick Use Samples
Sacrifice Details
Optimization Results
Pay Breakdown (Annual)
Tax Savings at Different Sacrifice Amounts
"Sweet Spot" Recommendation
$17,600
This is the estimated annual sacrifice amount that maximizes your tax savings, up to the concessional cap.
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What is a Salary Sacrifice Optimizer?
A Salary Sacrifice Optimizer helps you find the most effective way to use pre-tax contributions to reduce your taxable income and increase your overall wealth. It models the impact of sacrificing into superannuation or other benefits (like a novated lease) to find the 'sweet spot' that maximizes your tax savings without negatively impacting your cash flow.
Behind the Formula
The optimizer calculates your net pay under different salary sacrifice scenarios. It deducts the sacrificed amount from your gross income *before* applying your marginal tax rate. For super, it shows the 15% contributions tax versus your income tax rate. The 'optimization' comes from comparing your reduced take-home pay with the long-term benefit of the increased super balance or the value of the packaged benefit.
Expert Insights
- The biggest tax saving comes from the difference between your marginal tax rate and the 15% tax on concessional super contributions. The higher your income, the more tax you save.
- Be aware of the concessional contributions cap (currently $27,500 per year). This cap includes your employer's compulsory contributions, so you need to factor those in to calculate how much 'room' you have left to sacrifice.
- For those with a HELP/HECS debt, salary sacrificing can be a double-edged sword. While it reduces your taxable income, your repayment income (used to calculate HELP repayments) is adjusted to add back the sacrificed amount, so it doesn't reduce your student loan repayments.
Actionable Tips
- Use the optimizer to see how a small, regular sacrifice can grow into a huge sum over your career. This can be a great motivator to start early.
- If you're considering a novated lease for a car, use the optimizer to compare the total cost and tax benefit against paying for the car with post-tax money. It's not the right choice for everyone.
- Check if you're eligible for 'carry-forward' concessional contributions. If your super balance is below $500k, you can use unused cap amounts from previous years, allowing you to make a large, tax-effective contribution after a financial windfall like a bonus or inheritance.
Real-World Examples
Finding the Right Super Contribution
Someone earning $120,000 wants to boost their super. The optimizer shows that sacrificing $1,000 a month reduces their take-home pay by only about $630, but adds the full $1,000 (less 15% tax) to their super, a significant tax-effective boost.
High-Income Earner Capping Out
A high-income earner receives employer super contributions of $20,000. The optimizer shows them they only have $7,500 of 'room' left in their concessional cap, helping them set their salary sacrifice amount to avoid paying extra tax.
Not-For-Profit Employee
An employee at a charity uses the optimizer to see the massive benefit of packaging their tax-free living expenses. It shows that by packaging the maximum amount, their take-home pay increases by several thousand dollars a year.
Glossary of Terms
Concessional Contribution
A pre-tax contribution to your superannuation, such as employer payments or salary sacrifice, which is taxed at a lower rate of 15%.
Concessional Contribution Cap
The annual limit on the amount of concessional contributions you can make to your super without incurring extra tax. This cap includes your employer's SG contributions.
Novated Lease
A three-way agreement between you, your employer, and a finance company to lease a car, where payments are deducted from your pre-tax salary.