Author Topic: Need help Super contributions  (Read 940 times)

blazinblasian

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Need help Super contributions
« on: September 28, 2018, 06:52:55 AM »
Hello Mustachians and -ettes,

It is great to join your cult. I am new to the work force (late to the party) and relatively new to Australia. I don't understand how Super works, and how much I should be contributing pre-tax. Feel free to refer me to an accountant if you think that is more appropriate.

1. When you make pre-tax contributions to super, does that decrease your tax bracket for your remaining income? Or is that just being optimistic? (e.g.: You make 100k, and you contribute 10k pre-tax, does that drop the tax on your remaining take-home pay to $3,572 plus 32.5c for each $1 over $37,000.)?

2. If you exceed the contribution cap, it seems that they tax you at an atrocious rate (or they say they can). Do people aim to contribute just under this cap?

3. If you want to have cash flow for an investment, like a house, how much of a difference does it make to mortgage brokers if you have money in your Super v in your hands (excluding the deposit, of course).

4. If you are right on the cusp of an income bracket change (say 100k) wouldn't your cashflow improve by you making pre-tax contributions, because you aren't whacked with the $20,797 in tax? I think I'm gifting the government for my ignorance this year. . . . :(

Do they send you a tax form like in the US? I haven't seen one. . .

deborah

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Re: Need help Super contributions
« Reply #1 on: September 28, 2018, 09:36:45 AM »
1 yes.
2 they definitely do. Depends when you plan to retire. Only if you are old.
3 you can now put some house money into super. Otherwise donít know
4 yes
5 no. You fill it out online.

mjr

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Re: Need help Super contributions
« Reply #2 on: September 28, 2018, 04:21:37 PM »
I don't think you understand how marginal tax works.

If you make $100k, you'd pay $20797 + 10000*37% = $24497 in tax.

If you contributed $10k in pre-tax contributions, you'd pay $20797 in tax, but you'd also be up for 15% contributions tax on the $10k, so you'd pay $20797 + 1500 = $22297 in tax.

Your point 4 (because you aren't whacked with $20797 in tax) is all wrong.  There's a limit of $25k in concessional contributions, so your taxable income is going to be at least $75k, on which the income tax payable is $15922. 

blazinblasian

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Re: Need help Super contributions
« Reply #3 on: September 28, 2018, 06:51:36 PM »
Hello,

I am not sure how to quote previous posts, sorry. I see, so the difference in tax is not as great as I thought if you multiply it out. A10k contribution that would drop you to the lower tax rate of $3,572 plus 32.5c for each $1 over $37,000 would still end up paying the $20797, which is still 3-4,000 less than if a pre-tax contribution had not been made. Phew! On paper $20,797 seems much bigger than $3,572 plus 32.5c for each $1. But it's the same at $90,000, I get it now, thanks mjr!

Doesn't your work still have to provide you with a W-2 equivalent? What is it called here--so I can try to find it on my company's website.

mjr

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Re: Need help Super contributions
« Reply #4 on: September 28, 2018, 07:16:58 PM »
Your work will provide you (and the ATO, directly) a PAYG Payment Summary every July.

blazinblasian

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Re: Need help Super contributions
« Reply #5 on: September 28, 2018, 10:33:59 PM »
Thanks mjr.

marty998

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Re: Need help Super contributions
« Reply #6 on: September 29, 2018, 03:34:59 AM »
I still call them Group Certificates haha.

Yes... the $20,797 basically is the sum of all the tax brackets up to 90k income. The tables are published that way so you can do a bit less maths.

On point 2. You need to be careful here. Super contributions are not paid into your fund on the same day you get your cash pay. Your employer can pay them quarterly, and sometimes I've seen cases of 27 fortnights in a year for example, which does trip people up. It's a good kick in the backside to watch it closely, as most people don't.

On point 3, just don't salary sacrifice when you are applying for a loan. Banks policies are different on this, some will recognise that it's a reversible decision so they'll count the income, others will not. All banks are on their toes due to the Royal Commission investigations and are likely to be more conservative, so I'd advise against salary sacrificing if you are trying to get a loan.


blazinblasian

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Re: Need help Super contributions
« Reply #7 on: September 29, 2018, 09:03:42 PM »
Hey marty998,

That is very helpful, thanks.

Point 2: I had asked my Super representative about salary sacrificing, and as it was close to the financial year, she was saying it was best to get an accountant to calculate out how much to sacrifice at a time. It's unfortunate they make it so confusing--I feel like you should be able to do this yourself!! I guess one strategy could be to sacrifice more early on in the financial year, so that you can terminate the contribution when it approaches the cap.

Point 3: Thanks for the tip, I will allow the cash to flow into my savings account for the time being, until I finally get the guts to put it down on an investment property!!!! Then I'll see how much wiggle room I have for salary sacrificing (ha, which might not be much!).

nnls

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Re: Need help Super contributions
« Reply #8 on: September 29, 2018, 10:30:50 PM »
Hey marty998,

That is very helpful, thanks.

Point 2: I had asked my Super representative about salary sacrificing, and as it was close to the financial year, she was saying it was best to get an accountant to calculate out how much to sacrifice at a time. It's unfortunate they make it so confusing--I feel like you should be able to do this yourself!! I guess one strategy could be to sacrifice more early on in the financial year, so that you can terminate the contribution when it approaches the cap.

Point 3: Thanks for the tip, I will allow the cash to flow into my savings account for the time being, until I finally get the guts to put it down on an investment property!!!! Then I'll see how much wiggle room I have for salary sacrificing (ha, which might not be much!).

I just worked out how much super I get paid each month from my employer, multiplied by 12 and then subtracted this amount from the $25k limit. And then worked out how much I can contribute each month from my pretax income. It wasnt that hard to work out.

blazinblasian

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Re: Need help Super contributions
« Reply #9 on: September 30, 2018, 07:03:16 AM »
Sounds good nnls,

Thanks. I was able to work out a reasonable-sounding number. Now I just have to see how much I didn't contribute last year, since the amount you did not contribute should carry forward to be applied for one of the coming 5 years. They don't make that information obvious! I ended up e-mailing our Super representative.

mjr

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Re: Need help Super contributions
« Reply #10 on: September 30, 2018, 03:13:16 PM »
This scheme came into effect only 3 months ago.

Your super balance needs to be less than $500k.

You can't access the excess contributions until next year. (2019-2020).

https://www.ato.gov.au/super/self-managed-super-funds/super-changes-for-self-managed-super-funds/carry-forward-concessional-contributions-of-unused-caps-over-five-years/

blazinblasian

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Re: Need help Super contributions
« Reply #11 on: September 30, 2018, 08:40:05 PM »

You can't access the excess contributions until next year. (2019-2020).


Ohh, got it, thanks.

mspym

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Re: Need help Super contributions
« Reply #12 on: October 09, 2018, 10:34:54 PM »
Another way to contribute is post-tax and then claim it as concessional. It's a little more fuss but useful if your payroll is weird about paying super and you don't want to hit the cap.
I did it this year because my payroll only credits super each quarter, there is a 3 week delay on them paying  it and then another ~10 days for my super to credit my account. So before the end of the FY, I made a contribution that would fill my cap and notified my super that  I would be claiming $xxx as concessional contributions.