Superannuation and Salary Packaging
Salary sacrifice can be a smart way to boost your
superannuation. When you sacrifice some of your salary to super, you not only
increase the amount of dollars you will have in retirement, but you can reduce
the income tax you have to pay now. What’s more, salary sacrifice is
hassle free because your employer makes the contributions for you.
What is salary sacrifice?
Salary sacrifice is when you arrange with your employer
to contribute some of your future pre-tax salary into a variety of benefits.
Additional superannuation payments are one of these benefits. In essence, you
let your employer put some of your pre-tax salary into your super account rather
than receive it in your pay packet.
What are the tax advantages of salary sacrifice?
By salary sacrificing part of your salary into super
you are effectively reducing your taxable income. This means that you pay less
tax. Infact, depending on how much you sacrifice into super; you could even
jump into a lower tax bracket. For example, someone who earns $80,000 p.a.
base salary who sacrifices $5,000 per year into super will jump from the 40%
tax bracket to the 30% tax bracket, assuming no other income.
More money into you super
The great feature of salary sacrifice is that the dollars you contribute
to super are pre-tax dollars rather than post-tax dollars, which may mean more
money for your account and more money to earn compound interest to build a
greater retirement income.
Salary sacrifice contributions are taxed at 15% when
they enter your account. This may be much lower than the marginal tax rate
you pay, which can be as high as 46.5% (including the Medical Levy). Generally
the higher your income, the more tax savings can be made by sacrificing your
money onto super.
Salary sacrificing, other than super…
Many employers allow staff to package certain expenses
(i.e. motor vehicle, laptop computer, Income protection insurance, airport
lounge membership, mobile phone, briefcase or satchel, deductible investment
interest) from their salary.
Be sure to arrange a personal visit with a Financial Adviser by calling 1800
063 185
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