WHY GETTING PAID LESS CAN BE A GOOD THING SOMETIMES
You may think I have lost my mind, but stay with me here. Ultimately the more money you can earn the better you can be financially speaking, so why would I tell you to get paid less?
Salary sacrificing is the action of taking some of your pay (prior to the tax man getting to it) and directing towards another expense or to your superannuation fund. Doing this will mean that you will get less money in your account, but you will pay less tax overall.
Many employers have a variety of different expenses that are able to be salary sacrificed such as car loans/leases, laptops and even home loan repayments and bills if you work for specific organisations. Now whilst jumping on this sounds good, don’t always assume it will work out for you. Some of the leases end up costing you more in the long run, so it’s important to do your research, or ask your adviser to.
When it comes to superannuation, this will reduce your tax, and increase your savings for retirement. You might be pretty far away from retirement, but your future self will thank you for it.
In my opinion, the way things are at the moment, if you are 40 (or a couple of years either side) you need to start taking your retirement seriously. It’s enough time to make a serious impact on your retirement and equally means that you don’t have to go without too much now. The longer you leave it the harder it is.
But, the good news is that if you start salary sacrificing some of your pay, assuming it works to your advantage, you are reducing your overall tax, which ultimately should leave you in a better position.
Salary sacrificing isn’t going to work for everyone, so it’s important to do the maths and find out if it puts you in a better position. It will depend on your tax bracket, future plans, how much you need to live, the options available to you from your employer and whether you still have a HELP debt just to name a few.
Reducing tax is one part of the equation, but there are so many more elements you need to consider.
This post is from our resident Financial Planner Cara Brett, check out her details in the About Us section.