Know your limits & use them to maximise wealth…

For 2013/14 the contribution limit for individuals up to the age of 59 remains at $25,000.

From July 1, if you are aged 60 and over, the limit has risen to $35,000 per annum. If you have been salary sacrificing into your super fund to maximise the tax concession provided, I recommend you review these arrangements to ensure the full taxation benefit is obtained.

Is it ever too soon to salary sacrifice?

The simple answer is no. Personal circumstances, such as the existence on non-deductible debt i.e. a home loan, will impact the decision, but the long term benefit for a younger person is too significant to ignore.

For example

Beth is 35 years of age with a super balance of $50,000. She earns $150,000 p.a with employer super guarantee (SG) contributions of $13,875 p.a (9.25%).

If invested in a growth portfolio, Beth could have a balance of around $1,200,000 in 20 years’ time.  However, what if she contributed up to the $25,000 limit for the next two years only?

Beth could increase her super balance by around $200,000 in 20 years’ time through the power of compounding earnings.

Furthermore, Beth’s after tax out of pocket expense would only be $6,842, rather than $11,125. This is because Beth has lowered her taxable income after her salary sacrifice, so her tax liability is calculated on a lower sum.

“I’m over 60 years of age. What about me?”

The ability to contribute an extra $10,000 p.a to super could save you an extra $3,200 p.a, bringing the total saving of a salary sacrifice strategy to $9,600 p.a.

I highly recommend reviewing your salary arrangements early in the financial year to lock in a regular contribution to superannuation. The rewards speak for themselves.