Our learning module makes super easy to understand so you have the chance to turn your super money into a small fortune!
|Does nothing||Makes concessional
|Salary (before tax)||$100,000||$100,000|
|LESS pre-tax (concessional) contribution||$0||$1,377|
|LESS income tax||$26,632||$26,095|
|LESS cost of extra coffee||$840||-|
|Employer SG (9.5% of salary)||$9,500||$9,500|
|Pre-tax (concessional) contribution||$0||$1,377|
|LESS 15% pre-tax contribution tax||$1,425||$1,632|
|Super (after tax)||$8,075||$9,245|
As you can see, by giving up one coffee every work day over 48 working weeks (most people have around 4 weeks of holidays per year) at a total cost of $840, Laura has improved her super by $1,170 in the first year and paid less in income tax.
Start small, and as soon as possible
If you start early, the amount you choose to contribute to your super doesn’t have to be large to have a big impact - thanks to the power of compound interest. Many of us are familiar with the concept, where you earn interest on your principal investment and then earn interest on that interest as well.
When compound interest is working for you in your super it’s a powerful savings weapon. So the earlier you begin to add more to it, the better.
Consider your circumstances
Whether a before-tax contribution arrangement is right for you depends on your individual circumstances. When deciding whether to make additional contributions to your super and how much to contribute, you should consider your personal financial situation. You’ll also need to check that your employer allows additional before-tax super contributions.
As with all investments, there are risks associated with investing inside super. Before making an extra contribution, you should ensure you understand and are comfortable with the risks associated with your chosen investment option(s).
There are also limits around how much you can contribute from your before-tax salary, and exceeding these caps can result in financial penalties. Most people can currently contribute up to $25,000 per year, including their employer's 9.5% SG contribution. For more information on caps and penalties, go to the ATO website.
We’re here to help
There are other ways to give your super a boost, such as making after-tax contributions, to ensure you can retire the way that you want. To see how this works compared to before-tax contributions check out our salary sacrifice calculator.
Or if you need help with strategies around your super and more, talk to your financial adviser. If you don’t have a financial adviser, you can find an adviser in your local area or call us on 131 267.
If you’d like your super money to make a difference to the world as well as to your future, ethical investing may be for you.