Australia: How does salary sacrificing into super work?

Question

I am not yet thirty but I just read that for tax purposes salary sacrificing into super is a good idea. Am I too young to take advantage of this? How does it work? Anyone?

Answer 1

Salary sacrificing is taking money out of your before tax salary and putting it (untaxed or low tax, not sure) into your super for your retirement . This reduces your taxable income, reducing your tax, but also the money you get after tax each week.

You get a double benefit into super with more going in AND without tax. The problem is, you can't touch it until you retire in 30 years or so.

At your age I would think there are better things to put your money in to, even though you don't get a tax benefit. Things that will leave you more liquid so you can access the money when you need it, such as for a car or home in the next few years. I would suggest putting any excess salary into your mortgage if you have one, rather than sacrificing.

Other ways you can salary sacrifice are for cars or laptop computers, but your employer will need to be consulted.

You can opt out of sacrificing at any time so you could always do it for the short term.

Without doubt, speak to a financial advisor. One with a good reputation, there can be some dodgy ones around. This way, ALL of your financial issues can be considered, not just a bit of advice from us who don't know your exact position.

Check out the ATO website
http://www.ato.gov.au/super/content.asp?doc=/content/38172.htm

Answer 2

Thirty is not to young to put into super.
By taking money from your salary before it is taxed, it lowers the amount of tax you pay now and can help get those payments done smoothly.
If you have debts or commitments, the life insurance you may need can be part of your super fund - now you have insurance paid for and lowering your tax today too

Answer 3

You could also take advantage of the ATO Co-Contribution scheme. They will match your after tax contribution up to 150% depending on your income level.

Go to www.ato.gov.au/super to look at this in depth.

You should speak to your accountant or financial advisor as to the best strategy for you.