Making extra Super Contributions gets more attractive!

From 1 July 2014 the Government introduced a 3-year Temporary Budget Repair Levy that is payable by high income earners. The levy will apply at a rate of 2% on taxable income in excess of $180,000.

The top marginal tax rate including the Medicare Levy in 2014FY was 46.5%.

Based on the Budget Repair Levy and a progressive increase in the Medicare Levy – this will see the top marginal tax rate increase to 49% in 2015FY.

Given these increases – investigating the benefits of a salary sacrifice strategy for your personal situation – takes on greater significance.

Income directed to Super by way of a salary sacrifice strategy is charged 15% contribution tax as opposed to your personal tax rate. Given the 49% top marginal rate – you can save up to 34% tax. Plus you get the benefit of the future income and capital gains in Super being taxed at a concessional rate.

Considering extra contributions into Super can benefit all clients – regardless of income levels. Many younger clients see Super as something they should only consider and worry about once they start to get “old” – but it is important to remember that it is not only how much you save for retirement – it’s how long you save for that counts. You want as much time as possible to let compounding returns work their magic on your retirement savings.