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I am now in my late-40s and I keep hearing of so many people with much larger sums in super and I don’t know why. I have always put into super since it was made compulsory in 1992, I think, and I have always had a pretty good job. Can you explain why my super might be disappointing and what I can do about it? Could salary sacrifice help me play catch up and could you explain it for me?

As you are in your late 40s, you would have had some years with no super unless you were lucky to work where the boss made it a part of the job. You might have had a low-income job for a longer period of time than some of the people you compare yourself to despite your income being much better now. You could be in a dud fund where the performance was poor compared to your friends and the fees could be higher — these two factors can really hurt a super fund over the 21 years that compulsory super has been in place. I think salary sacrifice and maybe a better fund would help. Salary sacrifice is a way to turbo charge your super, where you pay more into your super via your wage. At the moment the cap for salary sacrifice is $25,000 minus the compulsory super your boss pays into your fund. This is now 9% and goes to 9.25% on July 1. Combined, these two contributions are called concessional contributions as they are taxed concessionally at 15% when they are put into your fund. Your boss actually gets a tax deduction when they are put into super, just as applies to wages paid. Your employer is able to claim a tax deduction for the contributions. When they enter your super fund, these contributions, as I have said, are taxed at 15% and that’s the big appeal as if you received this money as wages, you would be taxed at higher rates. Of course, you can’t touch the money until you reach your preservation age but it’s a great way to pump up your super.

Important information: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.

 

Published on: Sunday, July 21, 2013

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