But the good news is, it’s never too late to start growing your retirement income no matter what your situation.
Salary sacrificing into super is effectively a long-term wealth strategy that may help to grow your retirement savings over time.
We take a look at how it works, the benefits and some things to consider.
Salary sacrificing into super is really about sacrificing some of your income now, to save for your retirement.
This means you’re not just relying on your employer’s regular super contribution of 9.5 percent to save for your future.
It can involve setting up an arrangement between you and your employer whereby you agree to contribute an additional amount into your super from your pre-tax income.
As you’ll essentially be taking home less money, you may want to consider calculating how much of your income you can afford to give up. There are a number of calculators available that may help you with this.
Salary sacrificing into super offers a number of benefits. These include:
There is also the added power of compounding returns. As you start adding more money to your super account, you may earn returns on that extra amount over time. So, it’s that little bit of returns you earn in the early stages that can make a difference in the end.
There are a couple of important things to keep in mind if you’re thinking about salary sacrificing into super.
The tax benefit is only available if you contribute no more than $25,000 per year3 from your pre-tax income. This includes the regular super guarantee contributions made by your employer.
It’s also important to remember that the extra money you contribute into super is generally not accessible until you retire.
1 ASIC Moneysmart: https://www.moneysmart.gov.au/superannuation-and-retirement/how-super-works/super-contributions/salary-sacrifice-super
2 ASIC Moneysmart https://www.moneysmart.gov.au/superannuation-and-retirement/how-super-works/tax-and-super
3 Australian Taxation Office: https://www.ato.gov.au/Rates/Key-superannuation-rates-and-thresholds/?anchor=Concessionalcontributionscap#Concessionalcontributionscap
This article was prepared by BT, a part of Westpac Banking Corporation ABN 33 007 457 141, AFSL and Australian Credit Licence 233714. This information is current as at 9 July 2019.
This article provides an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such. It does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness, having regard to these factors before acting on it. This information may contain material provided by third parties derived from sources believed to be accurate at its issue date. No company in the Westpac group accepts any responsibility for the accuracy or completeness of, or endorses any such material. Except where contrary to law, we intend by this notice to exclude liability for this material. BT cannot give tax advice. Any tax considerations outlined in this article are general statements, based on an interpretation of the current tax law, and do not constitute tax advice. The tax implications of investing in property, shares or superannuation can impact individual situations differently and you should seek specific advice from a registered tax agent or registered tax (financial adviser).
Superannuation is a means of saving for retirement, which is, in part, compulsory. The government has placed restrictions on when you can access your investment held in superannuation. The Government has set caps on the amount of money that you can add to superannuation each year on both a concessional and non-concessional tax basis. There will be tax consequences if you breach these caps. For more detail, speak with a financial adviser or visit the ATO website.