Boost your super through salary sacrifice A tax-effective way to build your super

 rest.com.au/salarysacrifice

1300 300 778

Increasing your super savings now will give you more money to spend in your retirement Your 9% Super Guarantee contributions are a good start to build savings for your retirement, but may not be enough to fund the lifestyle you would really like. With salary sacrifice you can give your super a real boost while also reducing your income tax. Salary sacrifice – simple, effective Salary sacrifice is an arrangement with your employer where you make extra contributions into your super from your before-tax1 salary, rather than receive it as take home pay. The amount you salary sacrifice is counted as a concessional contribution towards your super.

Save on tax – today and tomorrow Salary sacrificing into your super helps you save on tax today and build wealth for tomorrow by: •

 aying only 15% tax on salary sacrifice P contributions, rather than your marginal tax rate which may be as high as 46.5% (including Medicare levy)

•

Increasing your super savings giving you more money to spend in your retirement

•

 educing your assessable income, which R reduces the amount of income tax you pay.

1

Before-tax contributions are not eligible for the government co-contribution

Salary Sacrifice I 2

Case study – Diane retires with an extra $69,000 Diane is concerned that she won’t have enough super for a comfortable retirement. She arranges with her employer to salary sacrifice part of her before-tax salary into her super. Diane currently earns $60,000. Let’s look at how her super would grow if she salary sacrifices $5,000 a year ($96.15 per week). $ 160,000

$143,000

140,000 120,000 100,000

$74,000

80,000 60,000 40,000 20,000 0

1

2

3

4

5

6

7

8

9

10

Year

With salary sacrifice

Without salary sacrifice

$60,000

$60,000

Amount salary sacrificed

($5,000)

$0

Assessable income

$55,000

$60,000

The outcome… Diane’s current annual salary is $60,000, leaving her with $47,500 take-home pay. Diane decides to add an extra $96.15 per week ($5,000 a year) to her super using salary sacrifice. This would reduce her take-home pay to $44,100 in the first year, but coupled with her employer’s super contributions Diane is able to boost her final super balance by an additional $69,000 over 10 years.

Less income tax

($10,900)

($12,500)

•

Without salary sacrifice $74,000

Take home pay

$44,100

$47,500

•

With salary sacrifice $143,000

SG Only

SG + Salary Sacrifice

Annual income Gross salary

Annual super contributions

3

Compulsory employer super

$5,400

$5,400

Salary sacrifice

$5,000

$0

Tax on contributions at 15%

($1,560)

($810)

Total super contributions

$8,840

$4,590

Take home pay + super contributions

$52,940

$52,090

Assumptions Superannuation account projection: Current salary: $60,000, increasing with inflation. Salary sacrifice contribution: $5,000 pa ($96.15 pw), increasing with inflation. Employer contributions are subject to tax at 15%. Investment earnings: 7.9% pa gross of fees and tax. Fees are in line with REST’s Core Strategy investment option from January 2011 as set out in the October 2010 PDS. Dollar-based fees increase each year at a rate of 3.5% pa No allowance has been made for insurance premiums. Inflation at 3.5% pa, which is 1% above the mid-point of the Reserve Bank of Australia’s target for consumer price inflation. The starting point for the projection is 1 July 2011. Results are shown in actual dollars. First year calculation: Personal income tax rates for 2011-12 apply. The individual’s personal income is subject to a Medicare levy of 1.5% and the 2011/12 Flood levy. All other income, taxes and tax offsets have been ignored, eg. Medicare levy surcharge. This table is for illustrative purposes only. Source: Rice Warner Actuaries

Salary Sacrifice I 4

Getting started with salary sacrifice 1. Speak with your employer to check that salary sacrifice contributions can be made on your behalf 2. V  isit www.rest.com.au/calculators to use our contributions calculator to estimate how much and how often you would like to contribute 3. C  onsider speaking to a financial adviser to determine how salary sacrifice can benefit your situation. As a member, REST will pay for your first advice call on a single super issue with Money Solutions*. Call us on 1300 300 778 and ask to speak to Money Solutions 4. Complete the attached Salary Sacrifice Form and hand it to your employer. Using salary sacrifice to fast track your super should not affect your existing employer super contributions or other employee entitlements such as overtime or loadings. Once your arrangement is in place, it’s a good idea to double check your entitlements have not changed.

How much can you salary sacrifice? You choose how much of your before-tax salary you wish to sacrifice into your super, but the government has placed concessional contribution caps for a financial year on super contributions taxed at 15%. Contributions over these caps are subject to extra tax. These concessional contribution caps are currently $25,000 per financial year if you are under age 50, and $50,000 per financial year if you are age 50 or over until June 2012. They include all extra before-tax contributions you make plus your 9% Superannuation Guarantee contributions. Would salary sacrifice suit you? People on a higher marginal tax rate may benefit from salary sacrifice more. If your marginal tax rate is less than 15%, there may be fewer tax advantages in salary sacrificing as your income and super tax rates may be the same. You also cannot salary sacrifice any salary or wages that have already been taxed at your marginal rate and you may not be able to salary sacrifice if you’re under an award agreement. Instead, there are other ways to maximise your super, visit www.rest.com.au/grow to find out how.

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Salary Sacrifice I 6

We’re here to help rest.com.au/salarysacrifice  1300 300 778 Please call between 8am and 8pm weekdays (AEDST)

*Money Solutions Pty Ltd (AFSL 258145). Money Solutions personnel are not representatives of the REST Trustee. Any financial product advice given by Money Solutions is provided under the Money Solutions AFSL. The Trustee does not accept liability for any loss or damage incurred by any person as a result of using products or services provided by Money Solutions. This material contains general advice which has been prepared without taking into account your objectives, financial situation or needs. Before making a decision based on this advice, you should consider its appropriateness having regard to your objectives, financial situation and needs. You should read the Product Disclosure Statement which is available from www.rest.com.au or by calling 1300 300 778 before making any decision about the product. Past performance is not an indication of future performance. When you become a member of REST Industry Super, you join the Retail Employees Superannuation Trust ABN 62 653 671 394. The Trustee is Retail Employees Superannuation Pty Ltd ABN 39 001 987 739, AFSL 240003. Registered office: Level 6, 50 Carrington Street, Sydney NSW 2000. The Trustee has no relationships or associations with any other product issuer that might reasonably be expected to influence us in the provision of this advice. Any advice is provided by REST’s employees who are paid a salary and may receive a performance-related bonus. No commissions or fees are paid for the financial product advice provided, either to representatives or third parties. RS/SALARY/SAC/BROCH 806.5 11/11 ISS2

Salary Sacrifice Form Please complete this form if you would like to make salary sacrifice contributions from your before-tax salary. Once you’ve completed and signed this form, please return it to your employer, not REST. Please note: Not all employers offer salary sacrifice so check that it’s available to you before you apply.

1

Contribution details Please deduct from my salary/wages each pay period: the sum of

as a concessional ‘salary sacrifice’ (before-tax) contribution and forward this amount to REST

$

or percentage /

Start deductions from (DD/MM/YYYY):

/

Salary sacrifice arrangements should not affect your existing employer super contributions or other employee entitlements such as overtime or loadings. Once your arrangement is in place, it’s a good idea to double check your entitlements have not changed.

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Your authorisation Surname

 

Mr

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ms

Mrs

Miss Dr

Month

Year

Other

  Date of birth

Given name/s

 

 

Day

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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REST member number

 

 

 

 

I understand that my salary sacrifice contributions will be forwarded to REST with my employer’s contribution. I agree that this authority shall remain in force until withdrawn by me in writing, and I understand that my accumulated contributions and earnings will be preserved until a condition of release has been satisfied. Day

Signature of applicant

Date

Month

 

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Year

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Eligibility to make salary sacrifice contributions To make salary sacrifice contributions you need to be: • under age 65; or • aged 65 – 74 and have been gainfully employed for at least 40 hours in 30 consecutive days during the current financial year.

Contribution cap The government has imposed an annual cap on voluntary contributions, which include salary sacrifice contributions. If your voluntary contributions exceed the cap in any one year, the ATO will levy tax on the amount over the cap at the highest marginal rate. Please take this into account if you are planning on making large voluntary contributions to your REST account in the near future. For more information about contribution caps visit www.rest.com.au/contributioncaps

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Please return this form to your employer, not REST RS/SALARY/SAC/FORM 12/11 ISS2