basic super contribution question

Hi

I have the option to either increase my contributions through my after tax income, or before tax via salary sacrifice. I am wondering what are the benifits/things to consider for each and strategies that can be done? my rough understanding is that any after tax contributions are not taxed at withdrawal but before tax contributions are taxed at 15% on entry and 15% on withdrawal?

thanks for any advice.

 

Hi

You need to run a few scenarios (sal sac 10 k vs after tax similar amount/8500/etc)

To answer your question, concessional contributions (be they from employer, salary sac or personal contributions that you claim as a tax deduction) are all taxed at 15% on the way in for standard accumulation style funds. At aged 60, having met a condition of release, the income (ie income stream via pension phase) is tax free assuming you have not exceeded the transfer balance cap.

Expand your question further and I will try to explain further

 

Salary sacrifice of super contributions is identical is outcome to making additional personal deductions in almost every instance. There is an issue some employers misuse however and this can REDUCE total super.

eg Fred earns $109,500 total remuneration and his employer super included in this is $9500 and salary is $100K. Fred asks to Sal Sac $1k a month from pretax earnings. So his salary falls to $88,000. In theory his employer is obliged to contribute only $8,360 instead of $9,500. Many employers wont do this and it depends on a range of factors including how packaging etc is confirmed in a contract and more.

Paying extra contributions after tax can still be converted to a tax deductible contribution provided the $25K cap is not impacted. This has only been the case for the past two tax years.

 

Agree with what Paul said above. I've seen this happen for many companies where the super is calculated after salary sacrifice.

Tax-deductible super contributions are the way to go, just make sure the correct procedure is followed with notice of intent and acknowledgement from your super fund.

 

Suggest OP learns the basics first, then actually asks his employer how they operate wrt sal sac if that is being considered.

There’s other threads on property chat with mainly good advice (often the misunderstanding is what is inaccurate) that OP could also review wrt additional contributions