Additional super contributions.....

[Mr X]

Changing jobs soon, moving into a higher tax bracket.

Was wanting to know if anybody had a magical formula for making additional Super contributions to lower your taxable income, such that you can make the contribution, but get the same amount take home still?

Any other ideas for maximising the dollars to my pocket rather than paying taxes?

 

[Papa G]

Changing jobs soon, moving into a higher tax bracket.

Was wanting to know if anybody had a magical formula for making additional Super contributions to lower your taxable income, such that you can make the contribution, but get the same amount take home still?

Any other ideas for maximising the dollars to my pocket rather than paying taxes?

By making extra contributions to super you will reduce the tax you pay, but unfortunately you will also reduce your take home income. In the unlikely event you are turning 60 this year, then there is definately a strategy I could talk to you about - otherwise salary sacrificing will only reduce the tax you pay.

 

[dreamkillers]

If your new employer does salary packaging you may have a few options available by paying off certain items (ie car/computer) pre tax thereby reducing your tax liability overall.

 

[nokiacasio]

To maximize overall lifetime earnings, maybe salary sacrifice 100% and your gross income will be zero. You pay no tax at all. All the money goes into your super fund, which does better than most investments.

 

[1jasonoz]

Changing jobs soon, moving into a higher tax bracket.

Was wanting to know if anybody had a magical formula for making additional Super contributions to lower your taxable income, such that you can make the contribution, but get the same amount take home still?

Any other ideas for maximising the dollars to my pocket rather than paying taxes?

Speak to your employer, find out if you can make personal contributions that they will match up to a limit. At my work we get the 9%, plus if we pay 5% they will also contibute an additional 5%, so we end up with 19% per year.

After doing that for 12 1/2+ years, the super account looks great for a 30 something!

 

[Scratcher Gillespie]

Changing jobs soon, moving into a higher tax bracket.

Was wanting to know if anybody had a magical formula for making additional Super contributions to lower your taxable income, such that you can make the contribution, but get the same amount take home still?

Any other ideas for maximising the dollars to my pocket rather than paying taxes?

This may be a silly question, but do you understand that going into a higher tax bracket doesn't mean your whole income is now taxed at that rate?

Eg: Someone earning $80,000 is in the 40% marginal tax bracket. However, only $5,000 of their income is actually taxed at 40%.

Apologies if this seems condescending, but it is a very common misconception about personal income tax.

 

[sabre_ac]

This may be a silly question, but do you understand that going into a higher tax bracket doesn't mean your whole income is now taxed at that rate?

Eg: Someone earning $80,000 is in the 40% marginal tax bracket. However, only $5,000 of their income is actually taxed at 40%.

Apologies if this seems condescending, but it is a very common misconception about personal income tax.

Its incredible the amount of people that think that is the case.

 

[Mr X]

This may be a silly question, but do you understand that going into a higher tax bracket doesn't mean your whole income is now taxed at that rate?

Eg: Someone earning $80,000 is in the 40% marginal tax bracket. However, only $5,000 of their income is actually taxed at 40%.

Apologies if this seems condescending, but it is a very common misconception about personal income tax.

I understood that already.

I have been on the upper limit of a tax threshold for a while now, and am about to smash through it, so trying to maximise all round is something I have been thinking about for a while - this change is just giving me the motivation to do something about it.

 

[daddy_4_eyes]

Its incredible the amount of people that think that is the case.

I remember a few years back my father advising me not to accept a pay rise because it would put me in a higher tax bracket and I'd actually be financially worse off

 

[navier-stokes equation]

Its incredible the amount of people that think that is the case.

Can you explain how it works?

 

[sabre_ac]

Can you explain how it works?

Are you asking in an attempt to catch me out? Or do you actually want to know....

Well its been a few years since my tax unit....But here goes.

Essentially if you get a pay rise and move into a new tax bracket, the amount above that brackets minimum amount is the only part taxed at the next tax rate.

Say the top tax bracket is 50% (Incomes of 60,000 and above).

Eg: Pay rise from 60K to 65K.

Only 5,000 of your income will be taxed at 50%, the rest will be taxed as it was previously.

 

[Scratcher Gillespie]

Say you are on $80,000pa

The first $6,000 is not taxed.

Above $6k, and below $25k is taxed at 17.5%

Above $25k and below $75k is taxed at 30%

Above $75k is taxed at 40.

This is how the thresholds work.