Standard Contribution Options for Super
Many Queensland Government employees, particularly Queensland Health and Department of Education employees are required to make a ‘standard contribution’ of their main salary to super as part of their fortnightly pay. You can nominate an amount between a minimum of 2% and maximum of 5%. The State Government also rewards those who opt for the higher percentages, by contributing a higher amount to super above its 9.75% super guarantee minimum. This means employees can have a total between 11.75% - 17.75% of their equivalent salary paid into super.
Tax savings can come from salary sacrificing this ‘standard contribution’ (between 2%-5%), paying it from before tax earnings rather than after tax earnings, thereby reducing your taxable income.
For example, for an employee earning $95,000 who elected their standard contribution to be 4%, their effective take home pay after tax and the contribution (paid after tax) would be $66,993 (Scenario 1). If this same 4% standard contribution was elected to be pre-tax, the resulting taxable income would reduce, decreasing the amount of tax paid, and it actually increases the effective take home pay to $68,456 (Scenario 2).
In a further example (Scenario 3) the standard contribution could actually be increase to 5%, and if made before tax, would still result in a higher take home pay amount compared with Scenario 1, whilst actually having more funds contributed to super.
It is noted that in scenarios 2 and 3, with the contributions made before tax, additional tax would be paid in the employees super account. This is at a flat rate of 15% and would be respectively be $570 and $713. As a result, when accounting for tax paid in both the employee’s personal name and super, scenarios 2 and 3 remain more effective.
Salary Packaging Benefits
Salary packing options are available to a wide range of Queensland Government employees, in particular Queensland Health workers have additional items that can be sacrificed including home loan repayments, rent payments, personal loan payments and utilities. For most Queensland Health employees this can be the equivale of just over $9,000 that can be package before tax (depending on the type of items packaged), reducing taxable income by the same amount.
Savings for employees earning $90,000-$180,000 could be around $3,330 per year, and for employees above $180,000 it could be around $4,050 per year.
Both salary sacrifice of super and salary packing for Queensland Government employees is generally through the RemServ service. Your Altitude Adviser can assist you with the forms and applications to implement the savings, and also ensure you do not exceed superannuation caps.