Superannuation is a long-term investment strategy for your retirement that you can build up during your working life. If you are working, your employer is generally required to contribute a certain percentage of your salary to your super fund on your behalf (known as the superannuation guarantee or SG) whether you are full-time, part-time or employed on a casual basis. As it is generally a long-term investment, your money has time to grow.
A salary sacrifice strategy allows you to make contributions to your super using pre-tax money. The benefit of this is twofold; not only do you boost your super by making additional contributions but, for income tax purposes, your taxable income is reduced by the amount you sacrifice to super, which could result in a lower tax bill.
The super co-contribution was introduced in 2003 to help low to middle income earners save for their retirement. Over the years, however, the eligibility criteria has been expanded to provide a greater benefit for a number of people. As a result, many people are reassessing the way they make contributions to their super.
Investing in shares
Investing in the sharemarket can give you the
opportunity to buy and sell shares. Over time, a quality share investment can
lead to both capital growth and income. While higher risk, historically,
shares have outperformed other asset classes. Your planner can help you
determine your risk profile and recommend suitable investments.
It's important to understand your level of debt, as well as the type of debt incurred, so you can manage it appropriately. Remember that not all debt is bad.
Saving and investing
Many Australians delay taking control of their finances because they don't have time, they find it too daunting or they may just not know where to start. The reality is that the sooner you take charge, the sooner you can start working towards achieving better results, especially in the long term.
Many use these terms interchangeably but in fact they are quite different. Saving is about putting some money aside for a rainy day. Investing on the other hand is about making your money work harder. It's important to understand the types of investments that suit your circumstances – not only the time over which you have to invest but how willing you are to accept fluctuations in the value of your investments.
Make your salary go further
More and more employers are now allowing their staff to take their remuneration as a package and certain other employee benefits that are concessionally taxed, such as superannuation. You may be able to substantially reduce your tax and/or gain other valuable benefits.