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Upgrade your future with salary sacrifice

Everyone loves an upgrade; whether it’s a promotion to business class or a step-up to the 'presidential suite' for your weekend getaway, there's nothing better than an unexpected bonus.

Well, you can upgrade your future right now by taking a few simple steps to bolster your super with salary sacrifice.

All you need to do is ask your employer to redirect some of your pre-tax pay and put it in to your super account. Even the smallest amount today can make a big difference to your tomorrow.

Here's how it works

If you earn between $80,000 and $180,000 a year, you pay up to 39% income tax. But your super fund pays tax at a special rate of only 15%~. So if you’re putting more money in super and reducing your pay packet, you’ll benefit from paying a lower tax rate on the extra money that goes in your super.

$100 could mean an extra $255,738 in the future

If you set aside $100 from your weekly take-home pay, you’ll get $139.40 in your super#. That’s a $39.40 bonus. You get this bonus because you’re paying the special tax rate. Over time this bonus will compound and could add an extra $255,738 to your final super balance.

salary sacrifice infographic

The key is to start now

Upgrading your future is easy. Simply complete the sample form and give it to your employer. If your employer has their own process, that’s fine, they’ll still need the same information we've outlined below.

How to set it up

Speak to your payroll or HR department to set up a salary sacrifice arrangement today. You’ll need to tell them how much you want taken out each pay cycle, in either ‘percentage’ or ‘amount’.

For example, if you’re earning $100,000 and you want to contribute $100 from your weekly take-home pay, you would tell your employer to take out $164 pretax (or 8.5%). Check out the highlighted row in the table below.

Remember, you’re taking the money from your pre-tax pay, so the equivalent pre-tax amount is more.

How much is enough?

It depends on your personal situation and how much you can afford to give up. But even the smallest amount can make a difference.

Here’s an example of what it could look like for someone earning $100,000:

Set aside from your weekly take-home pay

Tell your employer to take out pre-tax

Income tax savings for retirement*

Bonus super at retirement*#

$50
$82 (4.3%)
$20,488
$127,869
$100
$164 (8.5%)
$40,976
$255,738
$150
$246 (12.8%)
$61,464
$383,607
$200
$328 (17%)
$81,952
$511,476
$250
$410 (21.3%)
$102,440
$639,345


Talk to someone who knows

Get some good advice and book an appointment with a Mercer financial adviser today.

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Assumptions
# assuming a marginal tax rate of 39% on your personal income. Every pay packet assumes you will be paid on a monthly basis.
~ Calculation assumes Adjusted Taxable Income between $37,000 and $180,000, such that only 15% contributions tax is payable on contributions and no rebate applies
* Returns based on an assumed rate of 6.6%pa paid in arrears. Actual dollar values used, with no adjustment for the effect of inflation The amounts shown in the above case study are not predictions of actual outcomes as returns are likely to vary over time. The projected outcomes apply the following assumptions about returns over 20 years. Differences in returns (which may be positive or negative), and fees will alter the outcome. The case study is based on the following assumptions: contribution rate of $164 per week, investment return of 6.6% per annum. Starting age 45 and retirement age 65. This example also assumes concessional contribution caps have not been exceeded. Current at 1 June 2015. The example shown may not apply to your own situation, so we recommend that you consider your options carefully and seek financial advice about salary sacrifice. Salary sacrifice arrangements are subject to employer approval.

Contact Mercer Super AU for all of your superannuation and financial planning queries.
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