I am 32 years old and earn a good wage ($225,000 p.a.). I have decided it is time to start contributing more to super, and my plan was to increase my contributions to 15 per cent as you recommend in your book. However, in doing so I go over the concessional cap of $30,000 and will have to pay my full income tax rate for the extra contributions over that amount. My question is, does your advice change under these circumstances — should I limit my contributions to the cap amount? I feel at my age the money is better invested outside of super if I am paying the same tax. Would appreciate your thoughts.
You’re spot on, cobber. You should reduce your salary-sacrifice contributions so that the total of your employer guarantee, including your salary-sacrifice contributions, does not exceed the pre-tax limit of $30,000 per year. (Note: this will reduce to $25,000 p.a. from 1 July 2017. D’oh! ) The balance should be invested outside of super, preferably through a family trust into good quality shares.