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While contributions from your employer are a great start, they may not be enough to provide the lifestyle you’re after when your working days are done. Extra contributions no matter how small can help set you on the path to a more enjoyable retirement.

Two contribution types

1. Salary sacrifice contributions (from your before-tax salary).

Your employer can pay a portion of your before-tax salary to your super, instead of paying it to you. It’s an easy way to add to your super and potentially get tax benefits too.

By arranging for your employer to make salary sacrifice contributions on your behalf, you’re reducing your gross ‘taxable’ salary which means you’ll most likely pay less tax1See how this works

Salary sacrifice contributions are generally taxed at 15%2 when they are paid in your super account (just like your employer contributions). So, they are most effective if your marginal tax rate is above 15% (taxable income over $18,200 p.a.)3

What a big difference a little sacrifice can make1

It doesn’t take much to make a big difference to your future and offset the impact of any career breaks.

Emma, Michelle and Sarah are aged 30, on a salary of $80,000 p.a. with a $50,000 super account balance. Michelle and Sarah each take three 12 month career breaks. Sarah decides to add an extra $1,500 p.a. to her super – by salary sacrificing, her take annual take-home pay is reduced by just $983 (or $2.70 per day).

 

Emma

No career breaks or extra contributions

 

 

Last to age 102

4% chance of outliving super

Michelle

Three career breaks and no extra contributions

 

 

Last to age 99

13% chance of outliving super

Sarah

Three career breaks & $1,500 p.a. salary sacrifice contributions

 

 

Last to age 103

3% chance of outliving super

 

As you can see, Sarah retires with $76,000 more than Michelle who had three career breaks and $19,000 more than Emma who had no career breaks!

2. Personal after-tax contributions (from your after-tax salary).

These are contributions you make directly to your super from your after-tax salary or savings. You may be able to claim them as an income tax deduction.

You can make payments either as a lump sum or by setting up a regular payment. You can do this directly from a bank account using BPAY® or you may be able to ask your employer to make regular payments as a payroll deduction from your after-tax salary.

Claim a tax deduction on personal after-tax contributions

If you’re under 67 or between 67 and 74 and satisfy the work test, you may be able to claim a tax deduction for any personal after-tax contributions you make to your super. This enables them to be treated in the same way as salary sacrifice contributions – taxed at 15% and subject to the $25,000 limit, including any employer contributions.

To claim a tax deduction, you’ll need to complete a Claiming a deduction for personal super contributions form. Before completing your tax return, you’ll need to wait until you receive acknowledgement from us of your intention to claim a tax deduction.

Notes:

  1. The benefits of paying contributions from before-tax salary may be negligible if your marginal income tax rate is less than 15% or the total of your employer contributions and any before-tax contributions is more than $25,000 in a financial year.
  2. If you’re earning less than $250,000 per year your salary sacrifice and employer super contributions are taxed at 15%. If you’re earning $250,000 or more per year, these contributions will be taxed at 30%.
  3. Based on 2019-20 rates.
  4. In today’s dollars calculated using the Mercy Super Retirement Planner available at mercysuper.com.au. Assumptions used: retirement age 67, $44,000 p.a. drawdown from income account after retirement. Growth investment strategy with 7.0%/8.1% p.a. pre/post retirement return, percentage fee 0.3% p.a., insurance and administration fees $350 p.a., wage growth 3.5% p.a., career breaks (where applicable) for 12 months at ages 33, 37 and 40.

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Contribute using BPay

Contributions can be paid directly to your Mercy Super account from a bank account using Mercy Super’s BPAY Biller Code 344440 and your personal reference number, which you can find through Member Online or by contacting us.

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