An easy question for those in the know

Happy Sunday fellow investchat folks.

I have a simple question relating to super.

Q: If you salary sacrafice into super, can you end up with more "take home pay"? The moneysmart calculater says I should sacrafice $143 a fortnight in super but doesnt give reasons why.

Rockett

 

this is not one of the areas i know well , but it sounds like the $143 is a tax advantage ( bringing you into a lower tax bracket , perhaps ) OR the acceptable balance between regulations and normal tax liabilities .

but some of the industry professionals among the members could probably give you a much better insight

cheers

 

No you can't increase your take home pay

 

i , once ( many years ago ) had a job where if i worked 4 days a week my take home pay was $5 less than if i worked for 5 days .

apart from the risk of being made unemployed it was hardly worth working the extra day ( it seems to have been just above a tax bracket )

i was guessing a similar reduction in tax liabilities might have applied

 

Hi Rockett
It is not possible to get more take home pay by salary sacrifice as you cannot deduct 100% of each dollar. It is likely that the $143 each 2 weeks ($3,718 p.a.) is the difference between your statutory maximum contribution and other amounts contributed by your employers.
AnthonyK

 

Thanks for your guidance folks.

Have just read 'Barefoot Investor' and noted a few points. He suggests comitting 15% to super in total to beef it up to a nice nestegg in 30 years time when I start to draw on it.

Currently I have my super with BT in high growth funds (x2) But the more I read, the more I wonder if devoting a slice to ETF's would be a good idea because of thier reasonal stability and much much lower fees??

 

I can't find the high growth asset allocations for BT super on their website. High growth options that I have seen tend to have investments in equities around the 70% mark +/- 10% (both international and domestic), I would be surprised if BT had drastically different allocations. Capital would be invested in a reasonably conservative manner which in all likelihood isn't going to perform too different from an index ETF, there are some terrible ETFs outside the index space. My point is that fees would be the reason to consider other options.

As a side rant misunderstanding how tax brackets work is something that annoys me no end. People are only taxed at the higher rate on earnings above the threshold, not all earnings, therefore just slipping into a higher tax bracket doesn't reduce your take home pay as I've heard so many people rant about.

 

it sure as heck worked the other way when Paul Keating was PM under 'bracket creep ' and PAYE , unfortunately there was no super fund offered then , that employed expected you to quit soon ( or suffer a crippling injury .. as several did )

work 5 nights equaled 4 nights pay plus $5 after tax

 

Rocket66 ,

if signing up for the DRP plan ( if offered ) and using any franking credits ( some don't do franking credits ) i can see a valid argument for that strategy