Salary sacrificing to super occurs when you elect to have your employer invest an additional portion of your pre-tax salary into a super fund for you. When salary sacrificing, you effectively reduce your gross taxable income, which effectively means you could pay less tax. Employer super contributions are taxed at 15% and therefore, the sacrificed amount could be more favourably taxed than if taken as cash salary. Remember that you cannot access any money you contribute to super until you have reached your preservation age and retire from the workforce.

Salary sacrificing can be a tax effective way of saving for retirement, but to find out whether this is suitable for your current financial circumstance, we recommend that you seek professional financial advice first from our financial planner.

Salary sacrificing can:

• boost your super and increase the level of retirement savings you have

• reduce your income tax

• increase your take-home pay

There are a range of benefits you can include with salary sacrificing:

• Super

• car fringe benefits

• Electronic devices, such as your laptop, mobile phone or PDA

• Expense payment fringe benefits such as school fees, child care costs, home loan repayments

Take note of the following points before you set up your salary sacrifice arrangement:

• Additional taxes: if you are salary sacrificing for superannuation purposes, there may be a surcharge

• Employer's contributions to super fund: The usual 9% rate may be reduced when reducing taxable income through salary sacrificing

• Low income earners: If you earn under $25,000 a year, there may be little tax advantages to you salary sacrificing, because the tax rate on your salary is the same as the tax on your super contributions

• Deductions: You cannot claim deductions or tax offsets for salary sacrificing, because your employer is considered to have made the contribution for you. You also cannot claim a deduction for the cost of any administration fees paid to your employer to enter into and maintain a salary sacrifice arrangement.

• Fringe benefits tax: Salary sacrificing is not a fringe benefit and thus, is not subject to fringe benefits tax. It should not be reported as such on your PAYG payment summary

There are some restrictions to salary sacrificing including,

• Your employer can place limitations on the amount of salary sacrifice they will allow

• It is not compulsory for your employer to offer salary sacrifice

• Once you salary sacrifice into super, it generally must remain there until you retire. This is referred to as 'being preserved'

• You can only salary sacrifice future benefits

• You cannot salary sacrifice award payments

• You cannot put bonus or commission payments into superannuation as salary sacrifice after they have been earned

• There is a limit of $25,000 per year that you may receive as Concessional Contributions (employer superannuation guarantee, salary sacrifice and other employer contributions). All concessional contributions that exceed this limit will be taxed at the highest rate of 46.5%

• Members aged 50 years and above are entitled to a higher limit of $50,000 per year until 1 July 2012, when the limit will be decreased to $25,000 for all members regardless of age. if you exceed this limit, the contributions will be taxed at the highest tax rate of 46.5%

• For people earning %58,980 or less, making after-tax super contributions and accessing the Government Co-contribution scheme may be more beneficial

• Speak to a financial planner about the taxation implications when you eventually retire and access your superannuation

• Your salary sacrificed contributions may count towards the 9% contributions that your employer must make under the superannuation guarantee. This means your salary sacrifice can reduce the amount your employer is required to make. A salary sacrifice contribution is officially classed as an 'employer contribution'

To set up a salary sacrifice arrangement, speak to your employer first to make sure this option is available. Alternatively, you can contact one of the financial planners at Intellichoice on 1300 55 10 45 for more information on how to proceed, whether it is suitable for your current circumstances or if salary packaging is more suitable for your needs.