Extra super contributions?

I don’t know for sure Terry but I am
thinking more about commercial typically
with lower LVR anyway.

I am in the age group to concern more
about income vs growth lol.

Cheers,
FXD

 

Outside of super you can borrow for up to 105% or more for each property, if you can service etc, but inside super the fund will need to tie up a large chunk of cash - maybe 35% or more of the value of the property.

 

Yes good point.
Obviously I can’t service or rather the new lending regime classifies me so.
That’s where the motivation comes from.

I’d rather be able to still buy than not at all is my current thinking. I do pause and
ponder though should I be looking at
other investments besides properties but
hey PC is all about properties after all
in keeping with the spirits here

Rgds,
FXD

 

You’re not allowed to mention property in the Other Assets section of the forum. Punishable by death.

 

This one caught my attention and I think some advice will be appreciated.

I run this salary sacrifice question by my HR and the response I receive is that employer doesn't
have to contribute/apply compulsory super contribution for the salary sacrificed amount going
into superannuation because it is not considered "salary" once nominated for contribution.

Is there any federal or state (Vic) legislation clearly stipulates how this is to be handled?
Or is it purely up to individual employer HR policy statement?
Or does a employer's HR policy overrides state legislation if one exists for this situation?

Thanks,
FXD

 

Not sure what that means but anyone can now claim a deduction for contributions to super up to $25k including employer contributiins generally

 

Terry, I mean if I my normal salary is $10K per month, then my employer will pay into my
super account 10% of employer's contribution every month.

Now, instead of receiving $10K (minus tax) for the month of November, I advise my HR that I'd
like to salary sacrifice the $10K into my super for that month. Then, am I still entitled to the
employer's 10% contribution in November or not? That's my question.

My HR tells me no but I am looking for super legislation to keep him honest.

Thanks,
FXD

 

I have a vague feeling that they announced a change to this in the Budget this year?
Apart from that, you would need to look at your employment agreement (how is your package determined?) or award; but the basic principle is that if your salary for the month was $0 (because you sacrificed it), 9.5% of $0 = $0.

See SGC paid on Salary Sacrifice is RESC

"SGC law specifically says that an employer is only obliged to pay 9.5% on Ordinary Time Earnings (OTE), as opposed to 9.5% on gross / pre salary sacrifice earnings, unless there is a "law" eg. industrial agreement/EBA in place that specifically says SGC is payable on salary sacrificed to super amounts"

 

@qak has it - there's no obligation for the employer to pay super on any salary which has been sacrificed. If your employer goes down this path, you may be better off taking it as salary and making a contribution directly to your fund (must follow the pre-nomination rules to claim a deduction).

 

So for doing the financially responsible thing and sacrificing money now for the sake of helping yourself in retirement AND helping the whole country by drawing less of the pension, for this you get penalised by getting less super paid even though you still earned that money?

I must not be understanding it correctly.
How would this make sense to whoever passed the laws?

 

I may have to convince myself hard that it may still be worth doing based on some hypothetical
numbers below and for one month only:

1. Normal scenario:
- Take the salary = $10K/month
- Take home pay after tax = $7140/month using ATO calculator, tax paid = $2860/month
- Employer's super contribution (10% for ease of calc) = $1000 minus 15% tax = $850
- Total monthly earning after tax = $7140 + $850 = $7990
- Total monthly tax paid = $2860 + $850 = $3710

vs

2. Salary sacrifice one month pay:
- Sacrificed salary = $10K
- Take home pay = $0, tax paid = $0
- Employer's super contribution = $0
- Salary sacrificed amount into super = $10K, tax (15%) = $1500
- Total monthly earning after tax = $8500
- Total tax paid = $1500

There is a tax saving of $2210 ($3710 - $1500) to be had representing 59.59% ($2210/$3710)
saving.

The not so great thing is the net earning diff is a mere $510 (6.38%) more and it's not in my
hand ... unless it's going into an SMSF of which I have 100% control!

The real sting of the salary sacrifice is the foregone extra 10% earning from the employer and
it emerges as the biggest winner saving 10% vs ATO and employee!!!

I work hard enough and feel like underpaid already, do I want to save the company
another 10% so that I can earn a mere 6.38% more ? The number doesn't cut it :-(

 

I'm fortunate in that my employer would pay the 9.5% regardless.

You can get around this - take the pay as normal (so employer pays the 9.5%), then contribute the amount to super yourself (nb watch the annual limit of $25K). Means you are out of pocket the tax on salary until you do annual tax, but at least you are looking after your future retirement.

 

Or cease worrying about the tax aspect and contribute on an after-tax basis.

 

This is what I will be doing soon, completing the Notice of Intent form - https://www.ato.gov.au/uploadedFiles/Content/SPR/downloads/n71121-11-2014_js33406_w.pdf before I do my tax for the year.

 

Is this the form for claiming back the 15% contribution tax for after tax contribution?

Thanks,
FXD

 

No, that form is to ammend what PAYG tax you deduct from each pay packet.
Mostly used for people with CF+ properties. Instead of getting a tax bill at the end of the year, you can complete the Notice of Intent form to tell your employer to take more tax (above your usual marginal rate) so that it all squares nicely at the end of the year.
The after tax contribution to your super requires a form from your super fund.

#not advice, just my understanding of it all#

 

After some digging, found the link where ATO states the following re SGC payable by employer in
relation to salary sacrifice, so any employer who is still paying the SGC including the sacrificed
amount is indeed fantastic:

Salary sacrificing super - information for employers

Super guarantee is based on the reduced salary
The minimum amount of super guarantee you're required to pay for your employee is based on their ordinary time earnings. As entering into a salary sacrifice arrangement reduces your employee's ordinary time earnings, it will reduce the amount of super guarantee that you're required to pay.

Rgds,
FXD

 

Firstly, tax is 2860 PAYG and 150 contributions tax (not 850), and you are not paying the 150 - that relates to SGC, so your total tax paid remains @ 2860.

I think you tried to say that by diverting a monthly salary, you could reduce your taxable income by 10k, with an MTR of 39% (3900) vs contributions tax of 15% (1500), which would put you 2400 in front - less the 950 you have forgone if your employer does not include salary sacrificed amounts in their SGC calculation - Worst case is that you have 1450 extra invested on your behalf

Alternatively, self contribute the 10k and lodge the notice of intent, bringing you back to 2400 in the positive

Cheers

 

Yep. ITAA97 and Superannuation Guarantee (Administration) Act 1992 with some impact from The Fair Work Act 2009. And sometimes its affected by an award or enterprise agreement which may say otherwise. Note also that these rules do not prevent you / employer overclaiming concessional amounts so you are personally liable to excess contributions tax.

Commonwealth employment laws typically prevail over State Laws if you are employed by a constitutional corporation or a larger employer. See if you are covered here : Welcome to the Fair Work Ombudsman website

You need to think salary package. You know your employer doesnt need to salary sacrifice extra super anymore... Last 18 mths you can make personal contributions to fill the gap UP TO a single cap of $25K and then claim the deduction for the extra. It may even give you opportunity to stay under the cap.

 

No quite the opposite. Any personal contributions are typically counted as non-concessional (ie a member contribution) until you complete this form. The fund then taxes the concessional amount YOU contributed at 15% and then send you a letter neede to personally claim a deduction for the concessional amount YOU contributed, not the company amounts.

This paperwork and the fund acknowledge it before lodging a tax return.