How does the federal budget affect superannuation?

There was a lot of talk prior to the federal budget about potential changes to superannuation, however, superannuation was largely left as is during this year’s budget announcement in May 2015. This is an important time to think about your superannuation…How you can maximise your financial situation in light of current legislation…And how salary sacrifice to superannuation can build your retirement fund…After all, we all have things we want to tick off our bucket list…

So, you’ve just finished thinking about your dream holiday, so let’s take a look at how you can achieve this through salary sacrificing…Salary sacrifice takes your before tax income and contributes it to your super fund…You may also have the benefit of paying a lower tax rate for these contributions. Sound good so far?

Let’s talk tax for a moment, I know, boring, however this showcases how much tax you pay and how you can reduce that amount…If you earn $80,001 per annum you will pay $17,547 in tax…(check out the ATO’s income tax rates)…However for someone who earns $90,000 per annum, the additional $10,000 earned is taxed at 37%. Meaning you will pay an additional $3,700 in tax…Do you really want to give your hard earned cash to the Government? Wouldn’t you rather it go into your retirement fund? I know your thoughts are drifting back to your holiday…

What if you salary sacrificed $10,000 in to super? Stay with me here because if you do, you will not pay income tax on the $10,000…You will still need to pay super contributions tax however you will pay 15% tax, not 37%… Instead of paying $3,700 in tax you will only pay $1,500 – you immediately save $2,500…Plus, you build up your super fund by $8,500 per year…How did we calculate $8,500 per year? Simply subtract $1,500 (15% tax) from $10,000…It’s that easy…

To maximise the current legislation and budget, you should consider:

• Salary sacrificing the maximum amount to your superannuation fund.  Including what your employer contributes to superannuation on your behalf (if applicable). A person aged 49 or over on 30 June the previous year, can salary sacrifice up to $35,000 per annum into their super funds.

For self-employed persons the terminology is different in that it’s not referred to as salary sacrifice, but the results are the same as you can contribute up to $35,000 per annum and claim it as a tax deduction assuming that you meet the age requirement of 49 or over on 30 June the previous year.

• If you receive a bonus or a pay rise, consider salary sacrificing this amount into superannuation…The more you contribute now, the quicker your retirement fund will build…Arghh, fishing on the beach with a cold one in my hand…Sounds great…What’s your retirement dream?

​Written by Michael Hogue.