The upside of sacrifice



When you hear the word sacrifice, you may think it’s all about surrendering something of value. But it’s not all negative. Sometimes sacrificing means giving up something today to collect something better for yourself down the road.

When it comes to super, sacrificing a small part of your salary now could mean thousands of dollars difference in retirement. You may even enjoy some tax benefits along the way.

What is salary sacrifice?

Simply put, salary sacrifice is an arrangement you make with your employer to divert part of your pre-tax income into your super account. Once set up, there’s nothing left for you to do – the regular contributions are automatically made each time you are paid by your employer.

One of the most attractive benefits of salary sacrifice into super is that your pre-tax contributions are taxed at 15%. For most people, this is far less than your regular income tax rate which can reach up to 47%. And because you take home less money, you’ll reduce your taxable income too. This means you pay less tax while boosting your super savings.

Because it’s voluntary, the amount you contribute is entirely your decision. Even small, regular amounts can potentially have a big impact on your retirement savings over a long investment timeframe. Keep in mind there are limits on how much you can contribute before-tax. For the 2020-21 financial year, the combined total of your employer and salary sacrifice contributions must not be more than $25,000.

Is salary sacrificing right for you?

Salary sacrifice is a long term wealth strategy that is simple and tax-efficient. Depending on your income, this can be a viable approach for anyone wanting to boost their super balance. There are also specific circumstances where salary sacrifice can play a more vital role in ensuring a comfortable future lifestyle.

Avoid the gender super gap

If, like many Australian women, you’ve moved in and out of paid work to care for family members, it’s possible your retirement savings have fallen behind. Salary sacrifice can be a painless way to rebuild your savings and improve your financial independence.

Catch up after accessing early release

If you chose to access some your super early due to the financial turbulence of 2020, and now find yourself in a more comfortable position, it may be time to think about putting a little extra each pay into your super to even things out. It could make a big difference to your balance over the long term.

Get ahead of the super guarantee increase

Current legislation is scheduled to raise the super guarantee from 9.5% to 12% by 2025. More recently, growing political opposition has put the increase on hold. In response, many are taking matters into their own hands and salary sacrificing the difference until the guarantee is increased in full.

Take decades, not days approach

The impact of the pandemic on financial markets naturally has members concerned as they see their super go up and down. Making small, regular payments into your super now will help you build the long term value of your investment as markets settle. 

Ready to make the sacrifice?

If you’re ready to make 2021 the year you start building your balance by putting a little extra into your super account each pay, we suggest speaking to your human resources or payroll manager about setting up a salary sacrifice arrangement.

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Find & combine

Consolidating your super into one account makes your money work harder because you save on paying multiple sets of fees.

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