Should I Salary Sacrifice Some Of My Super?
Making voluntary contributions to your super fund is a great way to boost your retirement savings and help grow your nest egg for retirement more rapidly. Contributing to your super could also limit the amount of taxes that you pay each year. But is it the right option for you?
What does salary sacrificing mean?
Salary sacrificing allows you to voluntarily contribute a portion of your pre-tax salary into your superannuation fund each year to provide yourself with benefits of similar value. When the money is received by the fund, it will automatically get taxed at 15%, which is much lower than the marginal tax rate that most people pay on their income.
What are the pros and cons of salary sacrificing?
When determining whether to salary sacrifice some of your income, you need to assess the pros and cons involved. Luckily for you, we’ve done just that and listed them below:
- Pay fewer taxes.
- Your retirement savings can get exponentially boosted.
- All your investment earnings in super are subject to lower taxes.
- You can’t get your money out until you reach retirement age and meet certain conditions to have your money released.
- There are limits on how much you can put into your super account.
But first, an important note…
Before you put your salary into your super account, make sure that your employer is continuing to pay their portion of your super based on your gross income. Only deduct your contributions to your super after your employer has paid their portion. Getting an agreement in writing is the best way to ensure that you’re getting the maximum amount of money possible from your employer.
Check your super regularly to ensure payment:
You may also want to check your super regularly to ensure that your employer is paying the money they owe you into your super account. Plus, make sure you are depositing your money into your super at least once per quarter. You may want to deduct what goes into that account from your gross income to ensure that the appropriate amount that you are salary sacrificing does get deducted.
If you have the extra money, salary sacrificing to your super can help you get ahead and becomes massively helpful in ensuring that you have a good nest egg in place for retirement. Like anything though, you should speak with a financial adviser to see if such an option is right for you.