Australian Money Forum

[Investment Specialist]

Bring forward your salary sacrifice or personal deductible contributions

Currently there are age-based limits which restrict the amount of employer contributions (including salary sacrifice) and personal contributions that can be claimed as a tax deduction.

From 1 July 2007, the age-based limits will be abolished and employers and self-employed people will be able to claim a full tax deduction for their super contributions. However, these contributions and certain other amounts will count towards a 'concessional contribution cap' and contributions exceeding the cap will be subject to a penalty. The cap will be $50,000 pa or, if you're aged 50 or over, $100,000 pa for five years until 30 June 2012.

If you're aged 50 or over, you should consider making larger salary sacrifice or personal deductible contributions as soon as possible. This will enable you to take advantage of the higher limits and potentially get more money into the tax-effective super system.

[Miller]

Yeah... Sounds nice, but ... There is an opinion that these "super" changes are aimed to fight inflation by pulling some cash out of pockets.

[Investment Specialist]

They may well pull cash out of pockets but let's not forget inflation in this technological era of instantaneous information and communication is much more a global issue and will eventually lead to another rise in interest rates - and not only in Australia.

In the current era of record wages and such strong growth in domestic markets, why would we not take advantge of the tax planning and minimisation tools available to us courtesy of Mr Costello.

And for the Over 50s contributing significant money to sperannuation to reduce tax and in preparation for a tax free retirement after age 60 sounds like a pretty good deal and one they certainly deserve!

I can guarantee you won't fight inflation by keeping your money under the mattress. Maybe a high interest bank account will just maintain the purchasing power of your cash - perhaps....

[Miller]

I can guarantee you won't fight inflation by keeping your money under the mattress. Maybe a high interest bank account will just maintain the purchasing power of your cash - perhaps....

There is no doubt about the mattress. As for a high interest bank account, I recently discovered that Australia is one of the few developed countries which does not make banks to insure people’s deposits. So I wouldn't totally trust this option as well.

If one is 50 or 55 yo it does sound wise to put some extra in super, but if you are 25 or 30 there are better ways to maintain cash's purchasing power.

[vilemerchant]

If one is 50 or 55 yo it does sound wise to put some extra in super, but if you are 25 or 30 there are better ways to maintain cash's purchasing power.

There might be, but paying 15% tax on a super contribution instead of up to 45% income tax sure gives super a hell of a head start. An extra 30% is quite a lot of purchasing power 'lost' before it even hits your bank account.