One of the advantages of salary sacrificing into superannuation may be about to end as a result of proposed legislation set to take effect from 1 July 2009.
The new draft legislation proposes to include any salary sacrificed into superannuation as part of an individual’s income when assessing his or her eligibility for a number of age pension entitlements.
The additional benefits in question include income support payments, family assistance payments, government co-contributions, child support payments and the Commonwealth Seniors Card.
“A commonly-used strategy, particularly for those people in their thirties or forties, is to salary sacrifice and just get below the thresholds, whichever ones you’re looking at, to get some family tax benefits,” ING technical services manager Michael Gleeson said.
The use of salary sacrifice was also common in order to qualify for the government co-contribution scheme, according to Gleeson.
“The thresholds to receive the co-contribution are $30,000 and $60,000 – $30,000 to get the maximum and it tapers off at $60,000. So currently people just above those thresholds will salary sacrifice,” he said.
“If they’re above the $60,000 limit they might salary sacrifice to get below the $60,000, or if they are in the mid-range they might salary sacrifice to get down to the $30,000 threshold to increase their entitlement.
“Unfortunately, from 1 July onwards the strategy won’t work because the salary sacrifice will be added back in as a form of income.”
Gleeson suggested people looking to take advantage of these ancillary benefits had better set up their salary sacrificing arrangements now to allow them to maximise their benefits for the remainder of the year.
