For the first time ever in Australia, the mandatory super contribution by employers has reached 10 percent, up from 9.5 percent.
For the next four years, every year on July 1st, the mandatory contribution will increase by an additional 0.5% percent, until it reaches 12 percent in 2025. So what does this mean for you?
How will this extra super help you in the long run?
While 0.5 percent does not sound like an enormous sum of money, over the long term these extra contributions, aided by compounding returns, will result in more funds available to everyone in their retirement age to cover life and lifestyle expenses.
The concessional before tax super contribution cap increased from $25,000 to $27,500
For individuals who look to really give their super balance a boost this year, this increase will enable individuals to potentially reduce their taxable income by voluntarily contributing up to $27,500 into their super. It is important to note that this $27,500 is inclusive of mandatory employer contributions, so if someone receives $10,000 from their employer in super, they can only self- contribute an additional $17,500 in the same tax year to avoid exceeding the threshold and being subject to tax penalties.
What can you do when it comes to your super?
You can clarify with your workplace whether your employer will be making the planned super increases in contributions in addition to what you are already receiving, or whether this will be getting deducted from your existing take home pay commencing from July 1, 2021.
Small amounts can add up fast
The initial addition to super contributions is 0.5percent, but little amounts compounded add up fast, and by 2025 the difference could be an additional 2 percent each year compounding for future you to enjoy.
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