Salary Sacrifice
Salary sacrifice an efficient way of investing with pre-tax salary into superannuation. The main benefits include a decrease in your taxable income, and your investments are in the tax effective superannuation environment where the maximum tax on earnings is 15%.
Salary Sacrificing is where you "contribute" a portion of your salary into super before any income tax has been charged. Hence the portion of monies "sacrificed" will be taxed at 15% (superannuation tax) instead of your marginal tax rate (16.5% to 48.5% including Medicare).
Salary Sacrifice
Undeducted Contribution
Example
|
ORDINARY |
SALARY SACRIFICE |
| Salary |
$65,000 |
$65,000 |
| Salary sacrifice |
- |
($10,000) |
|
|
|
| Taxable Income |
$65,000 |
$55,000 |
| Tax payable |
$12,600 |
$9,600 |
| Medicare Levi |
$975 |
$825 |
|
|
|
| Take home pay |
$51,425 |
$44,575 |
However, if you were to allocate $10,000 from your take home pay for investment purposes, your disposable income would equate to $41,425. Hence, by using salary sacrifice you effectively have a higher amount of salary at the end of the day to cover living expenses.
Investments
There are many investment opportunities in the market place. Generally investments are separated into sectors such as defensive assets (Cash, Fixed Interest) and growth assets (Property, Australian shares and International equities).
The best investment mix for you will depend upon your individual circumstances, goals and attitude towards risk.
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