Yahoo Finance 'Use wisely': How to turn $15 into $40k by retirement
The new income tax rates have been in place for more than a fortnight now, with around 11 million Aussies pocketing up to $47 a week from the changes.
But while millions of Australians raided their super to stay afloat during the pandemic, barely any taxpayers are considering topping up their super with the added cash, research from Colonial First State found.
“The research indicates that those who have needed to access super early as a way of surviving income loss, particularly younger Australians, are not making rebuilding their superannuation a priority,” said CFS general manager Kelly Power.
But there’s a small – and simple – decision Aussies can make to bolster their nest eggs, the research revealed: salary sacrifice.
Middle income earners are set to receive an extra $1,080 from the income tax changes, which translates to around $20 per week back in their hip pockets.
However, if they salary sacrificed $15 of their pre-tax income per week, they would still be left with an extra $10 per week in after tax.
By retirement, that $15 per week would be worth a whopping $40,832.
Wait – what is salary sacrificing?
Salary sacrificing is an arrangement between you and your employer, where you agree to forgo part of your salary in exchange for benefits of a similar value.
In this scenario, that means you set up an arrangement with your employer for them to contribute an extra $15 per week pre-tax into your superannuation account, which means you’ll earn $15 less per week (pre-tax).
Your employer is still required to pay the 9.5 per cent super guarantee into your super – whatever you salary sacrifice is additional.
“By splitting your tax cut in this way, you balance the use of the extra cash – both now and into the future,” Power said.
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