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 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. Have a look at how this would apply to your own situation by using our calculator.
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.
AMP customer Therese talks about salary sacrafice
In this video, one of our customers explains how contributing more to her super has really started to make a difference leading up to retirement. Take a look.
What are the changes from 1 July 2014?
Under 49 (as at 30 June 2014)?
- your concessional contributions cap for the current financial year has risen from $25,000 to $30,000.
49 years or older (as of 30 June 2014)?
- you are now eligible for the higher concessional contributions cap of $35,000.
So if you're approaching retirement, adding to your super in pre-tax dollars is a more tax-effective way to boost your super balance, as you can contribute up to $10,000 more than in previous years. What an incentive!
I want to keep more of my money
For more and more Australians it makes financial sense to put more money into super, to prepare well for the future. If you’re not sure how to go about it we can put you in touch with a financial adviser who could help you, just like our advisers that helped Therese. For more information call us on 131 267 Monday to Friday from 8am to 8pm and Saturday and Sunday between 9am and 5pm AEST.
1 Or 30% if you earn over $300,000 pa.
By law, every SMSF must have a documented investment strategy.