Tax Minimisation Thru salary sacrifice

Hi All,

Harking back to the super debate and to put, for me, a more positive slant on things. I have found a way to create more cashflow by putting all of my salary in excess of $28,000 into super via salary sacrifice wef 01/07/2007. This has the effect of reducing my tax rate to 15% and I can withdraw the money from the fund as soon as it goes in. There is even a hint that I may get a $1500 co contribution from the Govt because I earn such a low wage. I am still gathering info on this to see how it will affect my situation. Anyone in the know as to the full implications, please feel free to enlighten us.

I worry that all this is too good to be true and there is bound to be some constraints.

I also wonder how the lenders will deal with this, will they treat the income from the super the same way as the income from a cash bond and therefore credited at 100% in dsr calcs or will they now reckon I only earn $28K??

Will I be able to also pay rental income into the super and what would be the tax implications.

So many questions.

Cheers Chrisv
 
Harking back to the super debate and to put, for me, a more positive slant on things. I have found a way to create more cashflow by putting all of my salary in excess of $28,000 into super via salary sacrifice wef 01/07/2007. This has the effect of reducing my tax rate to 15% and I can withdraw the money from the fund as soon as it goes in.

I don't get this. Presumably you can salary sacrifice into your super, but how to you get it out unless you're already over the minimum age (60 or whatever it is)?
Alex
 
how do you get it out unless you're already over the minimum age (60 or whatever it is)?
Alex

I believe you can access your non-preserved portion any time - however you pay tax that was due on the amount drawn. My understanding is that this could be an effective way to defer tax, as you would only pay 15% now. However, very limited knowledge on this at present, and hoping some seminars I am going to in the coming weeks will clear this up for me!

Cheers,

The Y-man
 
So what age does one have to be, before one can withdraw funds tax-free? Is the age limit different for males and females?
 
My understanding is that one must be over 55 to access contributions untaxed coming out and over 60 to access growth untaxed.

No age discrimination any more. That went out some time after Germaine burnt her bra.

Still doing research. This is an exerpt from presentation by Rio Tinto Superfund.

Transition to Retirement Allocated Pensions (TRAPs)

What is a TRAP?

Super law now allows people who have reached preservation age to access their super without having to cease employment
It’s done by converting your super into a regular income stream. A TRAP allows you to do this
TRAPs work in the same way as a traditional allocated pension except you generally can’t make lump sum withdrawals while still working
Potential to improve your tax position
Allows for a gradual transition to retirement
Will be widely available over the next few months


Superannuation announcements:

A Plan to Simplify and Streamline Superannuation

Abolition of reasonable benefit limits (RBLs)
Changes to taxation of super and pension benefits
Changes to contribution arrangements


Benefits taken before age 60 will be taxed in a similar manner, however:
5% of the pre-July 83 component no longer required to be declared as assessable income in tax return
Tax free threshold for benefits paid between 55 and 60 lifted from $135,590 to $140,000 (indexed)

For benefits taken after age 60:
RBLs abolished
Removal of all tax (applies to both withdrawals and pension benefits)

New rules for Company and Salary Sacrifice contributions

Currently taxed at the concessional rate of 15%
Amount that can be contributed is restricted by the Company due to Age Based Limits
$15,260 for employees under age 35, $42,285 for employees between age 35 and 49 and $105,115 for those over age 50

From 1 July 2007, Age Based Limits will be removed
Concessional tax of 15% will only apply to Company and salary sacrifice contributions up to $50,000 (indexed). Top marginal rate (currently 45%) + medicare levy will apply over this threshold
Transitional arrangements will be introduced for people who turn 50 between 1 July 2007 and 30 June 2012:
Concessional tax of 15% will apply to contributions up to $100,000
Top marginal rate (currently 45%) + medicare levy will apply above this threshold

Make some sense out of that!!

I will be talking to these dudes in the next couple of days to run some scenarious.

Will keep you posted.

Cheers Chrisv.
 
Y-man - If they are sub 60. Why bother contributing if your goal is to withdraw pre83 components? You can do that anyway without the salary sac.
 
Another perspective on salary sacrifice

I'd rather "sacrifice" my salary to the bank to meet investment property interest payments - it delivers excellent tax minimisation - and gear keenly into appreciating long term assets. Super! :)
 
I'd rather "sacrifice" my salary to the bank to meet investment property interest payments - it delivers excellent tax minimisation - and gear keenly into appreciating long term assets. Super! :)

Problem is that tax component might be much higher than 15%

But to take money out immediately, looks (from post 20-03-2007 09:52 AM) one has to be 55, so not much use for many.
 
Problem is that tax component might be much higher than 15%

But to take money out immediately, looks (from post 20-03-2007 09:52 AM) one has to be 55, so not much use for many.
The thread is "tax minimisation through salary sacrifice". Regarding the tax component being much higher than 15%. From my perspective, the tax is nil.

About taking money out immediately, well, again a matter of perspective. There are ways.
 
The TRAP strategy is very useful for older people, but you should see an accountant about it.

You can draw down a tax free pension while salary sacrificing all of your pay to your fund. The contributions in the fund are taxed at the normal 15%. There is a lot of juggling around so like I said, see your accountant.
 
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