One of the most effective ways to boost your retirement fund is to salary sacrifice into your superannuation account! You will be surprised at how quickly it can build up your nest egg for retirement without having a huge impact on your take home pay!
If you earn more than $37,000 a year, this solution will typically be a tax effective strategy for you, even if you start with just a small sum each year. The Australian Tax Office (ATO) allows up to $25,000 to be contributed into your superannuation fund each year at the concessional tax rate of 15%; meaning that any additional funds over the 9.5% of your employer contribution can be salary sacrificed from your salary into your superannuation account at just 15% tax!
That’s Bang for your Buck! For further information on rates and thresholds for superannuation salary sacrificing head to the definitive source, the ATO Website.
Let’s take a look at a real world example:
You earn a salary of $90,000 per annum before tax. Under this arrangement (assuming you have no other tax deductions) you would typically:
• Pay $22,067 in Tax and Medicare Levy
• Contribute $8,550 to Super (via the 9.5% Employee Super Guarantee) taxed at 15%
• Take Home $67,933 in cash.
If you chose to salary sacrifice $192.00 per week ($10,000 per year) into Super, you would typically:
• Pay $18,617 in Tax and Medicare Levy
• Contribute $18,550 to Super (via the 9.5% Employee Super Guarantee and $10,000 Salary Sacrifice) taxed at 15%
• Take Home $61,383 in cash.
As you can see, the sums add up. Salary Sacrificing works. For a reduction of $6,550 per annum in take home pay you have contributed an additional $8,550 (After Tax) into your superannuation account which will then work for you as your fund invests it for your future! To put this into perspective, assuming your income remained the same this would amount to an additional $256,500 over a 30 year period!
Just be sure that the Employer Super Guarantee and your salary sacrificed contribution does not exceed the limit of $25,000 per annum. If you are paid through PayMe we will notify you as you approach this limit.
This service is included as part of the PayMe Package at no additional coast, ask the PayMe team how we can help you by preparing scenarios of how salary sacrificing will affect your specific situation, by providing a sample payslip.
*PayMe are not a financial advisers, you should consider seeking independent legal, financial, taxation or other advice for your specific circumstance prior to entering into any salary sacrificing arrangement. PayMe has offered this advice as an example of the options available to you.