One of the best ways to boost your retirement funds is by salary sacrificing. It is a popular and effective way of taking advantage of lower tax rates and we have experts on hand to talk you through the process.
Salary Sacrificing involves you making a super contribution to your super fund by putting extra money in from your pre-tax salary. It is a popular strategy for employees on middle to high incomes, whereby you can make contributions from your salary before the tax man gets his hands on your wages.
Yet not all employers allow salary sacrificing, as it is a voluntary scheme. But if your employer has signed up to the scheme, we at Complete Financial Solutions can help you put together a salary package along with your boss to make the most of this popular retirement planning strategy.
The salary sacrificing scheme can see investors taxed at a maximum of 15% as opposed to the usual maximum rate of 46.5%. This is a massive savings and this saving in tax essentially will see you spending it in your retirement versus losing it forever now to the tax office.
There is also another advantage with salary sacrificing in that you can take advantage of a transition to retirement strategy the closer you get to giving up full-time work. This makes it possible to access some of your super in the form of a pre-retirement pension. Basically, this means if you reach your ‘preservation age’ – which is typically 55 years of age (if you were born before July 1, 1990) – you can draw a pre-retirement pension (usually up to 10%). This drawing can be redirected back into your super as a Salary Sacrifice contribution, creating significant tax savings. Sounds too good to be true? Well yes it is very good, but importantly the ATO have approved this clever strategy, yet 1000’s of people who don’t get advice don’t do it (because they don’t know about it) and this can have a devastating effect on their retirement funding. Our Financial Advisers experts can help you in this area.
Salary sacrifice arrangements need to involve an agreement with your employer and there are important rules in respect to the timing of this agreement & your wages/salary earned. You should also be aware that your salary sacrificed contributions and your employer’s Superannuation Guarantee contributions – as well as any additional employer contributions – count towards your concessional (before-tax) contributions cap. Your concessional contributions will be subject to a maximum of 15per cent but this can be adjusted to 30% tax if your taxable income is more than $300,000.
Whilst it may sound complicated, the benefits of salary sacrificing are huge and will help you live a more comfortable life in retirement, but you need to get good advice to make sure it is done properly and we are happy to help you with that.
