Keith is age 35 and earns $110,000 p.a. His employer contributes 12% of this salary to his nominated superannuation fund each year (this includes the employer’s mandatory superannuation guarantee contributions). Keith would like to salary sacrifice additional contributions into superannuation.Describe, in your own words how salary sacrifice to superannuation works, including from a cashflow and taxation perspective? What is the maximum amount that Keith can salary sacrifice to superannuation to stay within the concessional contribution limit? Show your workings

Answered: Keith is age 35 and earns $110,000 p.a.…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Keith is age 35 and earns $110,000 p.a. His employer contributes 12% of this salary to his nominated superannuation fund each year (this includes the employer’s mandatory superannuation guarantee contributions). Keith would like to salary sacrifice additional contributions into superannuation.
1. Describe, in your own words how salary sacrifice to superannuation works, including from a cashflow and taxation perspective?
2. What is the maximum amount that Keith can salary sacrifice to superannuation to stay within the concessional contribution limit? Show your workings

Expert Solution

Step 1

Superannuation is like a retirement plan in which employer as well as employee contributes towards this fund. The mandatory contribution by the employer is the 10% of the basic earnings of the employee.