Retirement and superannuation aren’t exactly at the forefront of a 20 or 30 year old’s mind – but we think it should be! Salary sacrificing more into your super now, could make a big difference later in life. An effective financial strategy is to vital in helping you achieve your goals and making most of the opportunities available. It’s never too early to start planning for the future.
So how do you do it?
Salary sacrificing is a strategy in which your employer takes some of your pre-tax salary and puts it into your superannuation fund – the ATO describes it as “an arrangement with your employer to forego part of your salary or wages in return for your employer providing benefits of a similar value”.
Rather than having your salary paid to you, you can have it paid into a superfund. If the sacrificed salary is made to a complying fund, it isn’t considered a fringe benefit. Another benefit, stated by the ATO is “if you make super contributions through a salary sacrifice agreement, these contributions are taxed in the super fund at a maximum rate of 15%. Generally, this tax rate is less than your marginal tax rate”.
This tactic not only increases the super you’re saving, but it also reduces the amount of tax you pay. Since the sacrificed income is not counted as assessible income (for tax purposes), it isn’t subject to Pay As You Go (PAYG) tax. Depending on your income, salary sacrificing could even drop you down a tax bracket!
The ATO has online resources for tracking your super, as well as helpful information on growing your super. They also recommend consulting the Fair Work Act 2009 if you’re considering salary sacrificing (here, you can find more information and check your entitlements).
Chatting with your loved ones and employer is also a good idea when considering salary sacrificing. However, to get the most out of your financial options and to fully understand the limitations that come with strategies like this, we recommend meeting with a trained professional.
Our friendly team are very experienced in their field and your initial consultation with them is free! Get in touch with us today.
Bridges Financial Services Pty Limited (Bridges). ABN 60 003 474 977. ASX Participant. AFSL No 240837. This is general advice only and does not take into account your objectives, financial situation and needs. Before acting on this advice, you should consult a financial planner.