Want to grow your nest egg faster?
How salary sacrifice can help you save tax and boost your super.
We’ve all heard of salary sacrifice—but what does it mean when it comes to your super? It means contributing extra to your super, on top of what your employer already does, in before-tax dollars.
Salary sacrifice payments—classified as concessional contributions because a lower tax rate applies—enable you to keep more of your money so your nest egg has a better chance to grow.
And even though the government recently froze the Superannuation Guarantee (SG), the compulsory percentage of your salary employers’ pay to your super, at 9.5%, for those Australians getting closer to retirement, making extra contributions to super could be a really good option.
Let’s have a look how this could help you out. Say you want to salary sacrifice $10,000 into your super so it’s taxed at 15%1 instead of your marginal tax rate. Assuming you were in the highest marginal tax bracket you’d add $8,500 to your super instead of just $5,100—that’s an extra $3,400 going into your super savings instead of to the Australian Taxation Office.
If you’re already being proactive and contributing more, you might be wondering how much is too much. Yes, there is a cap on the before-tax amount you can receive in your super each year, and if you go over this cap you’ll be charged extra tax and an interest charge.
The good news is the maximum limit for concessional contributions has recently been changed.
What are the changes from 1 July 2017?
- your concessional contributions cap for the current financial year is now $25,000.
I want to keep more of my money
For more and more Australians it makes financial sense to put away more money into super, in order to prepare well for the future. If you’re not sure how to go about it, call your financial adviser today and they can help.
1 Or 30% if you earn over $300,000 pa.
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