Compulsory member contributions
The difference between after-tax and before-tax
Eligible employees of the defined benefit divisions of Qantas Super can make their compulsory member contributions to their super from their before-tax salary.
Previously, these contributions could only be made from after-tax salary. Contributions made on a before-tax basis are often called “salary sacrifice” contributions.
Qantas Group introduced salary sacrificing for compulsory member contributions from 2008, and began making eligible members aware of this from that time.
What's the difference between these two ways of contributing to super?
Other things to keep in mind
Division 1
| Existing "after-tax" rate | Equivalent "before-tax" rate |
|---|---|
| Contribution rate specific to member | After-tax rate x 1.17647 |
Division 2
| Existing "after-tax" rates | Equivalent "before-tax" rate |
|---|---|
| 4% of Superannuation Salary | 4.71% of Superannuation Salary |
| 5% of Superannuation Salary | 5.88% of Superannuation Salary |
| 6% of Superannuation Salary | 7.06% of Superannuation Salary |
Division 3
| Existing "after-tax" rate | Equivalent "before-tax" rate |
|---|---|
| 5% of Superannuation Salary | 5.88% of Superannuation Salary |
Division 4
| Existing "after-tax" rate | Equivalent "before-tax" rate |
|---|---|
| 5% of Superannuation Salary | 5.88% of Superannuation Salary |
Tax effectiveness
For some members, making compulsory member contributions from before-tax salary may be more tax effective than from after-tax salary.
This is because contributions from before-tax salary:
- are made prior to the deduction of income tax; and
- are only subject to contributions tax of 15%.
If the benefit is withdrawn after age 60, the benefit tax is zero.
If the benefit is withdrawn before age 60, benefit tax will apply.
The tables below provide simple examples of how the tax may differ between these two approaches.
This table assumes an after-tax member contribution rate of 5% of salary and makes no allowance for differences in benefit tax if benefits are taken prior to age 60.
The tax is estimated using 2019/20 personal income tax rates.
There are alternative tax effectiveness strategies that may be suitable for your circumstances. For example, the government’s co-contribution scheme may be attractive to those who meet the eligibility criteria.
Contribution caps
Before-tax contributions are counted towards the concessional contribution cap. Other employer related contributions are also counted towards this cap, including Company contributions, SG contributions and for members of defined benefit divisions, Notional Taxed Contributions (NTCs).
After-tax contributions are counted towards the non-concessional contribution cap. It is your responsibility to monitor the level of your contributions. Substantial tax penalties apply if the contribution caps are exceeded.
2023/24 contribution caps:
| Concessional contribution cap | $27,500 |
| Non-concessional contribution cap | $110,000 |
Examples
A member with a gross salary of $50,000
| Before-tax (salary sacrifice) | After-tax | |
|---|---|---|
| Gross salary | $50,000 | $50,000 |
| Less before-tax contribution | -$2,940 | Nil |
| Taxable income | $47,060 | $50,000 |
| Less income tax and Medicare | -$7,783 | -$8,797 |
| Net income | $39,277 | $41,203 |
| Less after-tax contribution | Nil | -$2,500 |
| Take home pay | $39,277 | $38,703 |
A member with a gross salary of $100,000
| Before-tax (salary sacrifice) | After-tax | |
|---|---|---|
| Gross salary | $100,000 | $100,000 |
| Less before-tax contribution | -$5,880 | Nil |
| Taxable income | $94,120 | $100,000 |
| Less income tax and Medicare | -$24,204 | -$26,497 |
| Net income | $69,916 | $73,503 |
| Less after-tax contribution | Nil | -$5,000 |
| Take home pay | $69,916 | $68,503 |
NOTE: This illustration should not be used as the basis for making decisions about whether to make contributions from before-tax or after-tax income, as this illustration is simplified and takes no account of personal circumstances. Members considering whether to make before-tax or after-tax contributions are strongly encouraged to seek independent financial advice to assist them with their decisions.
How to switch your contributions
You must lodge a request to switch your contributions via Qantas Group Payroll.
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