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30 and Super

If you wanted to get people in their late 20s and early 30s excited you probably wouldn't be starting a conversation around Superannuation! Let's face it there aren't too many people of any age that are going to a barbecue looking to discuss the benefits of super.

Generation Y or Millennials as they are known, don't really care about super, mostly due to the fact that it is not accessible until they hit 60 years old, that's some 30 years away.

I can hear them right now screaming out, "30 years! that's double my age! Why should I care about something that I wont even be able to access until the year 2048!" Well there are a number of reasons, and the one we want to highlight in this article is the savings in tax.

So what we have done is worked out how much someone the age of 30 will save in tax if they were to salary sacrifice every year into super until the age of 60 (preservation age, the earliest a person born after 1 July 1964 can access super).

What is salary sacrifice? That's when your employer takes some of your before tax income and contributes it to your super fund. By doing this your income is taxed in your super fund at 15% instead of in your own name at potentially much higher rates.

And this is where the benefit lies, 15% tax instead of, lets say, 39% tax for someone earning $110,000 (income from $87,000 to $180,000 is taxed at 37% plus medicare of 2%, ignoring the levy surcharge).

That's a tax saving of 24 cents per dollar!

Because concessional contributions are capped at $25,000 per year, this person would only be able to salary sacrifice a further $14,550 per year. This is because their employer would have already paid their Superannuation Guarantee Charge of 9.5% of their income, which in this example would equal $10,450 ($110,000 x 9.5%).

So how much tax would someone save if they salary sacrificed the extra $14,550 every year from the age of 30 to their preservation age of 60?

Over 30 years that is a saving of $108,252!! ¹

That is $108,252 on top of SGC amounts that will be contributed throughout a persons working life as well as any investment returns in the super fund.

Unfortunately a recent survey found that one quarter of over-50s said they have less than $50,000 in super. This is hardly an ideal scenario so close to retirement. To avoid this, millenials must act now and seriously consider what their future will look like, because as any person in their 50s or 60s will tell you, it comes around quick.. ahh the 80s the good old years!

For more information contact your expert MP Tax adviser today.

¹ For simplicity's sake we have ignored the proposed increases in the SGC by the government as who knows what that could like in 5 years let alone 30! But that's a discussion for another time.


This calculation is based on purely tax savings and does not include any potential returns or fees within the super fund. The calculation is intended to provide illustrative examples based on stated assumptions and is not intended to be used as a substitute for professional financial advice.

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