For sons at Uni - Better to salary sacrifice into super or add to ETFs?

We have 2 sons (20 & 25yo), studying at Uni and working part time.

One will be paying tax for the first time this year.

His question was: Is it better for him to salary sacrifice into super or keep investing in ETFs (which I started him on 50/50 VGS/VAS) when he started working.

There are many +s and -s of both strategies (salary sacrificing is at 15% tax on deposits and earnings and can still invest in ETFs; but he can't access the money to do other things if good investment options come up)

Thoughts or experiences?

 

What's their marginal tax rate? Surely not high enough to be worth sal saccing?

 

Goals v preservation age.

 

Marginal tax rate $18-45k is 19c. It is more about the returns also being taxed at 15% as he leaves UNi, starts work, earns more, etc.

 

At 20/25? Same as ours probably were - have fun, meet girls, take risks because we believe we're immortal and bulletproof, etc.

Mum and dad's goal is to teach them about investing and delayed gratification. They actually came to us and asked since they are going to be paying tax for first time.

 

Should it all be about saving tax though?

Non-concessional contributions can be made which are not subject to the 15% contributions tax. Locked in to super for 40 years plus however. Just a thought but your son would need to think very carefully about it and could benefit from some better suggestions than mine.

 

It’s worth putting at least $1000 into super to get the free $500 government co-contribution if their income is below the threshold

Super co-contribution

 

+1 was just about to write up that they should consider this in making their decision.

 

Govco say they will automatically credit your fund when you do, but it doesn't always happen !

 

First Home Saver Super Scheme - can contribute up to $30k as SS or NCC & withdraw it for a home deposit (note that there is some tax payable @MrT with 30% rebate).

First Home Super Saver Scheme

 

You need to tick the box (non-concessional contribution).

 

And make sure it is a personal rather than a spouse contribution

 

Enforced long-term investment is good for returns. Inability to access money resulting from changes in legislation is bad (likelihood for superannuation over 50 years).

To avoid tax in personal names you could try low yield VGS outside super and higher yielding VAS inside super.

I didn't know about the $30k First Home Saver Super Scheme, which sounds good. Confirm the tax implications beforehand.