Salary Sacrifice vs. Personal Deductible Contributions (PDCs)

Superannuation is a tax-effective way to save for retirement, offering investment growth and tax benefits. If you want to make additional contributions while reducing your tax bill, you have two options:

• Salary sacrifice – Your employer deducts a portion of your pre-tax salary and contributes it to your super.
• Personal deductible contributions (PDCs) – You contribute after-tax money and claim a tax deduction when lodging your tax return.

Key Advantages

Salary Sacrifice

• Immediate tax benefit – Reduces taxable income right away, lowering the tax withheld by your employer.
• Automated savings – Ensures consistent contributions with minimal effort.
• Simplicity – No paperwork is required, unlike PDCs, which require a ‘notice of intent’ form.

Best for: Employees who prefer a “set-and-forget” approach, have regular income, and want to contribute steadily throughout the year.

Personal Deductible Contributions (PDCs)

• Flexibility – Contribute lump sums at any time during the financial year.
• Accessibility – Available to self-employed individuals or those without salary sacrifice options.
• Reversibility – If circumstances change, you can choose not to claim the tax deduction (though funds remain in super).

Best for: Individuals with variable income, large one-off payments (e.g., bonuses, inheritances), or those wanting to maximise deductions at the end of the financial year.

Combining Both Strategies

Many people use a mix of both: salary sacrifice for steady contributions and PDCs for additional flexibility at year-end.

Conclusion

Both options offer tax benefits, and the right choice depends on your employment status, cash flow, and financial goals. Consulting a financial adviser can help you optimise your super contributions while reducing tax.