To Salary Sacrifice or not to Salary Sacrifice?

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As you watch the news and hear the continual developments around COVID-19, you would be forgiven for thinking maybe it is time to consider stopping your salary sacrificing to superannuation and recommence when markets are less volatile.

This can be a natural thought in times of volatility, and rightly so, seeing superannuation tends to be the largest asset most Australians own besides their home.

We would suggest that you consider the facts below to assist with your investment decision-making.

  • It is important to remember when you hear comments like, “My superannuation has lost thousands of dollars”, that superannuation is a tax vehicle, and you can invest the same in or outside of superannuation. Superannuation is not an asset class of its own.  Your superannuation will be invested in asset classes such as cash/fixed interest, shares, and property which dictate the volatility and return that you will experience in any investment inside or outside of superannuation.  It is also important to remember you only trigger a loss if you were to sell the asset.  This information is discussed and expanded on in our recent webinar.
  • Remember why you began salary sacrificing to superannuation.  The benefit of salary sacrificing to superannuation is to save an amount to superannuation from pre-tax salary so you have a higher net amount you can invest.  For example, an individual earning $95,200 annually and is salary sacrificing $100 per week pre-tax to superannuation rather than receiving this in hand is saving an extra $1,248 for the year.
Salary sacrifice amount Amount in super after 15% tax Net salary received after income tax at 39%
$5,200 $4,420 $3,172


  • Using the above example also, if we were to ignore how the money might be invested inside or outside of superannuation, for now, the $5,200 invested pre-tax into superannuation would need to fall by around 24% before even considering the after-tax cash salary of $3,172, if you did not salary sacrifice to superannuation.
  • For many, superannuation is a long-term venture and by continuing to invest, you will obtain the benefits of compounding returns.  Interest on interest provides the growth potential of an investment over long periods of time.  Albert Einstein is purported to have said that compound interest is man’s greatest invention. Also, our own “Albert”, Paul Shepherd speaks about compound returns further in this Youtube video.
  • And this brings me lastly to the fundamentals of dollar-cost averaging. By continuing your salary sacrificing to superannuation and if your employer forwards this to your superannuation fund weekly, monthly, or quarterly, you are investing at different times in the market.  In particular, at the end of March, if you were purchasing Australian shares, you would have received an estimated 25% discount on this purchase compared to the last quarter, December 2019. (based on returns of All Ords)


As humans, we generally question cheaper prices in markets and whether this is a good time to buy or not, but we always pursue a discount when it comes to buying a home or vehicle.  I’m yet to hear someone offer a higher price or the advertised price on a home or vehicle.  Human emotions play a big role in how we see investing and are counter-intuitive to how we respond in most cases when it comes to purchasing an item.  Any time is a good time to invest if you have the long term in sight, but dollar-cost averaging assists in smoothing out that volatility on the overall purchases, which happens when you don’t even know it via your employer contributions and any additional salary-sacrificing to superannuation.

When we are all back to gathering with others, and you hear at the next BBQ or around the lunch table at work that someone has stopped their salary sacrifice due to the volatility, maybe consider giving them the gift of the facts above for them to consider.


Frances Easton (CFP® Professional, MFinP, BBus-Acc,) is a representative of Alman Partners Pty Ltd, Australian Financial Services Licence No: 222107.

Performance data shown represents past performance or simulated performance. Past performance is no guarantee of future results and current performance may be higher or lower than the performance shown. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost.

Note: This material is provided for information only. No account has been taken of the objectives, financial situation or needs of any particular person or entity. Accordingly, to the extent that this material may constitute general financial product advice, investors should, before acting on the advice, consider the appropriateness of the advice, having regard to the investor’s objectives, financial situation and needs. This is not an offer or recommendation to buy or sell securities or other financial products, nor a solicitation for deposits or other business, whether directly or indirectly.