If you’re aged 50 or over, some changes that affect how much you can ‘top up’ your super contributions may be coming your way. So start thinking about how you can give your super a real boost now to help increase your retirement savings.
The 15% tax rate on concessional contributions makes super one of the most tax-effective ways to save for retirement.
If you’re aged 50 or over and still working, your current annual super contributions cap of $50,000 may potentially be reduced to $25,000 from 2012-2013. To give your super a boost, now’s the time to take advantage of the current super cap and tax concessions.
What are the tax benefits?
Whatever your marginal tax rate, you’ll be paying just $1,500 tax on a $10,000 contribution (provided your contribution cap has not been exceeded). The example below shows how much tax you can save if you contribute as additional $10,000 to super instead of taking it as part of your salary.
| Taxable income: | If your marginal tax rate (includes Medicare levy) is: |
Tax payable at $10,000 | Net amount in your pocket | Concessional tax at 15% on $10,000 super contribution | Net amount invested in your super | Tax saving |
| $37,001 – $80,000 | 31.5% | $6,850 | $3,150 | $1,500 | $8,500 | $1,650 |
| $80,001 – $180,000 | 38.5% | $6,150 | $3,150 | $1,500 | $8,500 | $2,350 |
Case study: Carol’s salary sacrifice strategy
Carol, aged 52, arranges a regular salary sacrifice of $1,000 a fortnight starting from 1 July 2011. For the 2011-12 financial year, Carol’s salary sacrifice contributions will total $26,000 (a net contribution of $22,100 for the year after $3,900 concessional tax is deducted).
Carol’s marginal tax rate is 46.5% (including Medicare levy). If she were to take the $26,000 as part of her salary she would receive just $13,910.
With a salary sacrifice strategy Carol has just boosted her super investment and benefited from an additional tax saving of $8,190.
Make the most of it
Investing more now means you can increase your chances of growing your wealth for a comfortable retirement. So if you’re reaching or over 50, give me a call to discuss how you could give your super a boost.
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