Check your employer's contribution

How do I do that? The first step is to ask whether your employer offers a salary-sacrifice arrangement. It's unfair but there's no obligation for your employer to do so.

How's that? Salary sacrifice is simply an arrangement where you trade some of your pay for higher employer super contributions. Instead of paying tax on that income at your marginal rate, it goes into super pre-tax and is taxed within the fund at 15 per cent. So if you're on the 30 per cent marginal rate and you sacrifice $100 a week into super, you'll be saving about $858 a year in tax (including the Medicare levy).

In addition, earnings each year on your super will also be taxed at a maximum rate of 15 per cent, allowing your savings to grow faster than they would if invested outside super.

Is there a limit to how much I can sacrifice into super? Not as such, though there is a limit on the concessional super contributions that can be made each year on your behalf. IPAC Securities' head of technical services, Colin Lewis, says this limit includes your employer's compulsory super contributions, any additional voluntary contributions your employer may make and any of the fund's costs met by your employer, as well as what you sacrifice. As of July 1, these limits have been reduced. Those under 50 can receive only $25,000 of concessional contributions and those aged 50 or more get $50,000.

"For example," Lewis says, "if you're under 50 and earning $160,000, your compulsory super contributions will total a bit over $14,000. You can only top it up by about $10,000 without exceeding the cap."

Lewis says if you exceed the cap, the excess contributions are taxed at the top marginal rate of 46.5 per cent. The excess is also counted against your non-concessional contributions cap. If you exceed this as well, he says, you could find yourself slugged with tax of 93 per cent on the excess. Therefore, it is important to review the sacrifice arrangement regularly, particularly if you're nearing those caps and your circumstances change. Centric Wealth technical research manager Anne-Marie Esler says you can sacrifice either a dollar amount from each pay or a percentage of your pay. It can apply to just your ordinary earnings or to things such as bonuses as well. However, you can sacrifice only salary you haven't earned yet, which is why arrangements should be put in place early in the financial year.

Do I have to sign a contract? Esler says it varies between employers but to meet the Tax Office's requirements, the sacrifice agreement must be in writing. Usually, you'll have to fill out a form.

The agreement should also be clear about how the sacrifice will affect your compulsory super entitlement. It is legally possible, for example, for your employer to use your sacrificed contributions to meet its Superannuation Guarantee obligations or to reduce its SG payments.

Let's say you earn $100,000 and your employer is paying the 9 per cent SG or $9000. You want to sacrifice $10,000 a year. Technically, it would be possible for your employer to stop paying the $9000 and use the sacrificed $10,000 to meet its SG obligations.

Lewis says you should be clear about when your employer will pay the sacrificed contributions into your super fund and check the money is going in as it should be. He has seen cases in which employers have deducted the contributions from salary but not handed them onto the fund or where contributions have been transferred across only towards the end of the financial year  depriving the fund member of the benefits of dollar-cost averaging and earnings on the money throughout the year.