- redwingParticipant@redwingJoin Date: 2003Post Count: 2,733
Earn 33.5 per cent on your money – instantly
If you have a larger windfall –
say $20,000 or $50,000 – one of the quickest ways to get a guaranteed 33.5 per cent return (presuming you are on the top marginal tax rate), is to ask your employer to contribute the maximum allowable deductible contribution into your superannuation via salary sacrifice, suggests Jason Andriessen at State Super Financial Services.
For a 35-year-old that amount is $35,138, and for someone older than 50 it is $87,141.
What you do then is deposit your lump sum into an easily accessible but high interest bearing cash management account and draw on the capital to supplement your income.
Your total income won’t be affected, but instead of being taxed at 48.5 per cent the portion of your salary that is “sacrificed” into super is taxed at only 15 per cent.
That’s a one-off savings of 33.5 per cent – before you account for any earnings on the super fund.
The scenario would be as follows: Professional aged 35 years, receives salary of $80,000 a year with no other income sources, has an investible windfall of $50,000.
If he were to direct $27,000 into superannuation as a salary sacrifice contribution, it would bear $4050 tax.
If it is taken as cash salary it would bear $12,745 tax.
The annual tax benefit is the difference of $8695.
Directing the $27,000 into super will reduce take-home pay by $14,255 a year.
That shortfall is taken from the $50,000 capital rather than income, which will last for about 3.5 years.
The tax effectiveness of the contributions, over the 3.5 year period, net contribution to superannuation, will have converted the $50,000 windfall into $80,325 before any earnings –
without affecting the “income” of the investor. Andriessen points out that readers should not act on these suggestions without seeking specific financial planning advice. There may be other considerations that would apply, particularly preservation, benefits taxes including the effect of the reasonable benefit limits (RBLs), and possibly superannuation surcharge
YEP- I also looked at the article and thought ‘wow’, now all you need is that windfall
ALL THE BEST FOR 2004Steve McKnightKeymaster@stevemcknightJoin Date: 2001Post Count: 1,763
Yeah… but you can’t then access the money until you retire. 
Plus you’ll get taxed on the way out too, so the return on offer is based on the best case scenario and not on all the facts.
Alas for the pros and cons on super…
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