Give yourself the ultimate break

Thanks to its generous tax treatment, coupled with the power of compounding, superannuation is the ideal long-term investment

- Vita Palestrant

Ꭰeeply embedded in Australians' psyche is the annual scramble to maximize tax deductions before June 30. Yet super's more generous tax breaks are ignored. A likely explanation is that retirement seems a long way off, so why bother now?

Independent financial adviser Nick Bruining, a director of Bruining Partners, says people fail to understand just how advantageous the tax breaks are.

“I don't think people grasp it. You often see their jaw drop to the floor when they realise they get a tax break just for putting money into super,” he says.

"You can load up as much as you can, within the rules, and know that once you ultimately get to retirement, it's all tax free. Every dollar that comes out of super is tax-exempt income, and you don't even have to put it on your tax return.

"There's nothing that beats it as a vehicle for investment. It has so many benefits, not only on the tax side of things, but also on the social security side as well.”

SALARY SACRIFICE

There's a $27,500 annual limit on how much pre-tax salary you can contribute to super. The $27,500 includes your employer's compulsory 10% super guarantee (SG). These concessional contributions are taxed at 15%.

"For most people, the super contributions tax of 15% is going to be significantly less than their marginal tax rate had they received the money in their hot hands instead. So that's the biggie,” says Bruining. Once you know how much extra you can afford to contribute, tell your employer you want to salary sacrifice some of your pay into your super account, but be careful it doesn't breach the $27,500 cap.