Perpetual Private’s head of strategic advice Colin Lewis says clients who have salary sacrificing arrangements in place need to review their levels of contributions now that the lower $25,000 concessional contribution is in place.
“They need to ensure that they don’t over-contribute so they really need to review their salary sacrificing arrangements straightaway,” Mr Lewis said.
These clients also need to consider whether making salary sacrificing arrangements is the best strategy.
“Will they continue using salary sacrifice or [switch to] personal deductible contributions because, in some ways, doing your own contribution or claiming a tax deduction gives you more flexibility and more control,” Mr Lewis said.
“[For example,] if you’re normally making contributions through salary sacrifice on a fortnightly or monthly basis, you could put that little bit of extra cash into a mortgage offset and at the end of the year, put in the exact amount of contributions between your SG and your cap.
“So there are a couple of things to think about there in terms of the level of contributions being made and how contributions are going to be made.”
Yes, and what about the power of compounding earnings from a regular addition to the super portfolio?
Salary sacrifice has always been a clean and easy way for people to get money across to super and removes the temptation to spend the extra.
Whilst interest rates are so low, it’s hard to argue that offsetting debt rather than investing in a sound super portfolio makes sense.
The ability to contribute without the 10% test will benefit those that have other non salary income. Those with salary sacrifice should stick to their knitting.
And what about the extra tax being paid as PAYG during the financial year if you stop the salary sacrifice arrangement?