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Western Suburbs Weekly - - Business -

F all of the strate­gies around su­per­an­nu­a­tion, one of the bet­ter ones for some peo­ple is salary sac­ri­fice. Done prop­erly, a salary sac­ri­fice strat­egy can sig­nif­i­cantly boost your re­tire­ment nest egg, re­duce your an­nual tax bill and still leave you with enough money to live on. How is that pos­si­ble? Well, the key is that the amount of your pay that is ‘sac­ri­ficed’ into su­per is taxed at a max­i­mum of only 15 per cent, much less than the mar­ginal tax rates that ap­ply even to mid­dle in­come earn­ers.

That money that is salary sac­ri­ficed into su­per is no longer con­sid­ered when cal­cu­lat­ing in­come tax, ef­fec­tively re­duc­ing your gross pay and your an­nual tax bill.

The end re­sult can be that the amount of money that ar­rives in your hand ev­ery pay pe­riod may be only slightly lower but your over­all su­per po­si­tion can im­prove greatly.

In short, your cur­rent stan­dard of liv­ing is hardly changed but your fu­ture stan­dard of liv­ing is be­ing en­hanced.

While salary sac­ri­fice is gen­er­ally not as ef­fec­tive for lower-paid work­ers, there is a small ben­e­fit to be gained even for work­ers who earn above $18,201 when the 19 per cent mar­ginal tax rate kicks in.

At the high in­come end, work­ers need to be care­ful not to breach a few caps: the $25,000 an­nual cap on con­ces­sional con­tri­bu­tions, the life­time cap of $500,000 for after-tax con­ces­sional con­tri­bu­tions and the $1.6 mil­lion to­tal cap on su­per that can be trans­ferred into a re­tire­ment ac­count.

In prac­tice, th­ese caps will mainly con­cern very high in­come earn­ers.

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