Can you really become wealthy from a get-rich-quick scheme? This article addresses the many “investment opportunities”, both legal and illegal, that promise big returns over a short period of time, explaining the risks associated with each, and the importance of professional advice.
If you are earning more than you need to live comfortably, salary sacrificing may be an attractive option to reduce your tax, boost your superannuation and prepare for a more comfortable retirement later on.
Salary sacrificing simply involves having part of your salary paid into a superannuation fund by your employer rather than receiving it as income. These contributions are not included as part of your assessable income, reducing your income tax burden.
But you can’t have it all your own way.
Salary sacrificing is such an attractive strategy but beware of exceeding the concessional contributions cap which will negate any tax benefits. Staying under your applicable limit will mean salary sacrificed contributions attract only a 15% contributions tax. This is significantly less than you would pay in income tax if you received it as income. You will also need to have a formal agreement in place with your employer. And importantly, you won’t be able to access the money until you reach your preservation age. Depending on your year of birth you may have to wait until you turn 60 before you can access your super.
Karen is promoted to a senior management role and her annual salary increases from $70,000 to $80,000 per annum. She is offered the option of having the additional remuneration paid direct into her superannuation (salary sacrifice) or receiving it as income, which she could then contribute into superannuation. The following table compares the different outcomes of the two strategies including the first year’s earnings on the contribution.
|Without Salary Sacrifice||With Salary Sacrifice|
|Less: salary sacrifice||–||$10,000|
|Additional assessable income||$10,000||–|
|Less: Income tax (32.5%)||$3,250||–|
|Less: Medicare levy||$200||–|
|Additional income after tax||$6,550||–|
|Personal contribution into superannuation||$6,550||–|
|Less: Superannuation contributions tax (15%)||–||$1,500|
|Net contribution into superannuation||$6,550||$8,500|
|Earnings on additional superannuation (7%)||$230||$298|
|Less: tax on superannuation earnings (15%)||$35||$45|
|Superannuation earnings after tax||$195||$253|
|Additional income (inc. superannuation earnings)||$10,230||$10,298|
|Total boost to superannuation||$6,745||$8,753|
There is an obvious win-win for Karen by sacrificing the additional remuneration to super – she pays less tax and increases her superannuation balance by a larger amount.
If you want to take advantage of saving tax through salary sacrificing to super, consult your financial adviser who can assist you in determining if it’s right for you, and if so, set up an effective arrangement to maximise your benefits in both the short and long term.
You need to consider with your financial planner (or adviser), your objectives, financial situation and your particular needs prior to making an investment decision. Futuro Financial Services Pty Ltd and its authorised representatives (or credit representatives) do not accept liability for any errors or omissions of information supplied on this website
Steve May, Luke Styles and May Wealth Pty Ltd T/A Steve May Financial Services are Authorised Representatives / Corporate Authorised Representative of Futuro Financial Services Pty Ltd ABN 30 085 870 015, Australian Financial Services Licensee, Licence number 238478. Please refer to our website at www.stevemayfs.com.au to reference our Financial Services Guide and business/adviser profiles.
May Wealth Pty Ltd ABN 71 612 234 518 trading as Steve May Financial Services is a Corporate Authorised representative of Futuro Financial Services Pty Ltd ABN 30 085 870 015, Australian Financial Services Licensee, Licence number 238478.
Steve May and Luke Styles are Authorised Representative’s of Futuro Financial Services Pty Ltd ABN 30 085 870 015, Australian Financial Services Licensee, Licence number 238478