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?

Before-tax (salary sacrifice) contributionsAfter-tax contributions
Source of contributionsRegular pay prior to the deduction of income tax. Once the contributions have been deducted, the remaining income is subject to income tax. In this case, gross salary is ‘sacrificed’ (or exchanged) for super contributions made to the Plan by your employer.Regular pay after income tax has been deducted. The contribution is deducted from net salary.
Income taxNot payable on these contributions.Income tax has already been paid on your income before the contribution is made to the Plan so none of the actual contribution itself is subject to income tax.
Contributions taxContributions tax of 15% applies, payable in the Plan.Nil
Benefits taxIf benefit taken after age 60: NilNil
Benefits taxIf benefit taken before age 60: Yes tax will applyNil
Contributions capThese contributions are concessional contributions made by your employer and are counted against the concessional contribution cap.These contributions are non-concessional contributions (NCCs) and are counted against the NCC cap.
Co-contributionsThese contributions do not count for the Government co-contribution.These contributions count for the Government co-contribution. Actual amount of co-contribution depends on income.

Other things to keep in mind

  • Salary Sacrifice is an arrangement between an employee and their employer by which an employee agrees to forgo part of their future salary in return for the employer providing a benefit of similar value. Under this change, the benefit that the employer will provide is the amount of the compulsory member contribution plus the required contributions tax.
  • Making contributions from before-tax salary (salary sacrifice) has no effect on your superannuation salary, that is used by the Plan to calculate other superannuation benefits.
  • Before-tax contributions are not counted towards the Government co-contribution scheme. If you only make before-tax contributions you will not be eligible to receive a co-contribution. You may still qualify for a co-contribution by making voluntary after-tax contributions providing that other requirements are met.
  • If you are an eligible employee, you may elect to vary your contributions between before-tax and after-tax at any time. This will be implemented at the first available pay period following receipt of the form.
  • If you have minimum superannuation benefits arising from earlier membership of Australian Airlines plans, these minimums will not be affected by any change between before-tax and after-tax compulsory member contributions.
  • While before-tax contributions reduce your taxable income, from 1 July 2009, they do not reduce your income for means testing certain government benefits or family support payments.
  • To ensure that the Plan is not impacted by this change, the before‑tax compulsory member contribution rate will be higher than the after-tax compulsory member contribution rate. This is because before-tax contributions are taxed as employer contributions and as such attract a 15% contributions tax rate. By grossing up the before-tax contribution amount, this ensures that it is the same as it would have been as an after-tax contribution. The contribution rates are shown in the following table.
Division 1
Existing "after-tax" rateEquivalent "before-tax" rate
Contribution rate specific to memberAfter-tax rate x 1.17647
Division 2
Existing "after-tax" ratesEquivalent "before-tax" rate
4% of Superannuation Salary4.71% of Superannuation Salary
5% of Superannuation Salary5.88% of Superannuation Salary
6% of Superannuation Salary7.06% of Superannuation Salary
Division 3
Existing "after-tax" rateEquivalent "before-tax" rate
5% of Superannuation Salary5.88% of Superannuation Salary
Division 4
Existing "after-tax" rateEquivalent "before-tax" rate
5% of Superannuation Salary5.88% 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.

2019/20 contribution caps:

Concessional contribution cap$25,000
Non-concessional contribution cap$100,000

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-$2,940Nil
Taxable income$47,060$50,000
Less income tax and Medicare-$7,783-$8,797
Net income$39,277$41,203
Less after-tax contributionNil-$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-$5,880Nil
Taxable income$94,120$100,000
Less income tax and Medicare -$24,204-$26,497
Net income$69,916$73,503
Less after-tax contributionNil-$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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