Do you want to know how to make 19.5% per annum on going with no risk! Sounds great right, maybe it is a scam. Guarantee you it is not, it is a real return you can make but like everything you are required to make some sacrifice.
In this case I am talking about salary sacrifice into your superannuation. Superfunds are taxed at a rate of 15%. You as an individual employee have a sliding scale tax rate, the more you earn the more tax you pay.
If you make over $37,000 per year you will pay tax plus Medicare levy at an average rate 34.5% on every dollar earned over $37,000. If you salary sacrificed $10,000 of your income which is tax at the 34.5% into your Superannuation fund, your tax saving will be $3,450. Inside of your super fund the $10,000 will be taxed at 15%, so you pay $1500 in tax. This is a saving of $1950 or a return of 19.5% on the initial $10,000 investment.
But wait there is more! Let’s say your income is $70,000 pa; your take home pay would be $55,700 pa. After the salary sacrifice of $10,000 your take home pay will drop to $48,900 pa. Which is only a difference of $130 per week!
The catch is that these funds will be locked away until you retire. But the benefits are huge! It is a combination of the three main factors will allow you to create wealth, return on investment, reduction in tax and time.
Let compare the two investments of $10,000, one through salary sacrificing into super and another outside of super after paying income tax.
Investments outside of super after tax leaves you with $6550 to invest at 8% adjusted of tax on return, over 10 years. The expected value would be $84,000.
Investment inside of super after tax leaves you with $7500 to invest at 8% adjusted of tax on return, over 10 years. The expected value would be $102,500.
· Over 10 years you would have an extra $18,500 or 22%.
· Over 15 Year you would have an extra $40,000 or 28%
· Over 20 Year you would have an extra $75,000 or 33%.
Keep in mind this is just for investing in super as opposed to outside of super.
But let’s face the facts; you most likely would not have saved the money unless you did salary sacrifice. So in real terms you would have an extra $102,500 after 10 years or an extra $185,000 after 15 years or an extra $300,000 after 20 years.
What sort of difference would this make to your life! You could retire earlier or travel more when you retire. The point is at least you would have a choice, is your current strategy going to give you any choice?
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