The product, branded "Salary Sacrifice", is a superannuation fund option that will allow an employee to transfer or "sacrifice" all or some of their income which is above the $60,000 threshold directly into a superannuation plan by way of employer contributions. This will effectively reduce a person’s take-home salary and so lessen their overall tax liability while they increase their superannuation savings.
Tower Managed Funds’ managing director Stuart Fish said he was confident that the new superannuation product option would meet a real need amongst people looking to save tax-efficiently for their superannuation. "The Government’s new tax legislation will have the effect of encouraging employees to save more for their retirement at the same time as reducing their exposure to the new higher tax rate.
"And for employers it’s an excellent opportunity for them to introduce an attractive option to their employment packages at no real extra cost to themselves," Fish says.
Retirement Commissioner Colin Blair agrees: "Such schemes can be a low-cost and simple way for employers to offer worthwhile benefits to staff. It is encouraging to see the financial service industry developing new ways to offer consumers retirement savings options through their workplace."
The Government decided earlier this year to increase the top personal tax rate to 39 percent and leave the Specified Superannuation Contribution Withholding Tax rate unchanged at 33 percent. To ensure the tax differential was not misused, the Taxation (FBT, SSCWT, and Remedial Matters) Bill was introduced in March this year which stipulated that a fund withdrawal tax of five percent of an employer’s contribution would be applied under certain conditions to withdrawals from a super fund.
"But even with this fund withdrawal tax, a window of opportunity remains open that can be used by people who wish to save more tax-efficiently for their retirement," Fish says. "Essentially, this window of opportunity is Salary Sacrifice."
Tower will add the Salary Sacrifice option to one of its most popular personal superannuation plans and to selected company-supported superannuation schemes.
Fish says this option will be available as soon as the legislation is passed.
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