Retirement
Aussies reminded about their own ‘salary cap’ as footy season kicks off
Retirement
Aussies reminded about their own ‘salary cap’ as footy season kicks off
Salary sacrificing can set Aussies up for future success according to Chartered Accountants, but you’ll need to keep the annual cap in mind.
Aussies reminded about their own ‘salary cap’ as footy season kicks off
Salary sacrificing can set Aussies up for future success according to Chartered Accountants, but you’ll need to keep the annual cap in mind.
As the first rounds of the AFL and NRL kick off, Chartered Accountants Australia New Zealand (CA ANZ) has encouraged Aussies to consider how they use their own ‘salary cap’ on concessional super contributions.
CA ANZ superannuation expert Tony Negline suggested that, as is the case in many of Australia’s most popular sports, better use of the cap typically leads to greater long-term success.
“The footy being back is a great reminder for Aussies to salary sacrifice into super well before tax time and set themselves up for future success. But, there are some tips and traps that new players need to be aware of,” said Mr Negline.
He explained that salary sacrificing allows employees to forgo a part of their salary or wages and, in return, have their employer pay more of their pre-tax wages into their super fund.
“This reduces the amount of tax payable on the total income you earn, up to a certain amount,” said Mr Negline.
“That’s because the salary sacrifices you make to your super account are not taxed in your personal name, but in your super fund at 15 per cent.”
Contributions made under salary sacrifice arrangements count towards the annual cap on concessional super contributions, which is set at $27,500 during the current financial year.
However, Mr Negline said that many Aussies were unaware about the carry forward rule that allows them to exceed this cap if their current super balance is below $500,000.
“The way this works is to look at whether you have any unused concessional contribution caps from a prior financial year. But amounts carried forward that have not been used after five years expire, so it is ‘use it or lose it’,” he said.
“Subject to the cap and any unused carry-forward concessional contribution entitlement, the other way of boosting your super balance is to make a personal tax-deductible contribution from your after-tax wages or other spare cash you might have.”
Mr Negline encouraged Aussies to think about how salary sacrificing would impact their take-home pay, personal budget and overall tax position and to contact their accountant for additional information.
“To make the most of these super and tax advantages – it’s important not to leave it too late,” he added.
“The ATO guidance is clear, you can’t go back in time and sacrifice wages you’ve already derived, but the good news is you still have a bit of time to play with before 30 June 2022.”
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