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Salary sacrificing your super

Posted on December 21, 2016 by admin

Contributing extra to your superannuation is a good way to boost your retirement funds.

One of the ways you can add more to your super is through salary sacrificing. Salary sacrifice is an arrangement with your employer to forego part of your salary or wages in return for your employer providing benefits of a similar value.

Salary sacrificing your super means your employer will redirect some of your salary or wages into your super fund instead of to you.

These salary sacrifice contributions are taxed at a maximum rate of 15 per cent, which is generally less than your marginal tax rate. The sacrificed amount will not be considered a fringe benefit if the super contributions are made to a complying super fund.

There is no limit to the amount you can salary sacrifice (provided there are no limitations in your terms of employment); however, you must be wary of the concessional (before-tax) contribution cap. If you go over the cap, you may have to pay additional tax.

Keep in mind, the salary sacrificed amounts count towards your concessional contributions cap, in addition to your employer’s contributions (i.e. compulsory employer contributions).

Generally, excess contributions will be included as taxable income, taxed at your marginal tax rate plus an excess contributions charge. Note, that your age may affect the concessional contributions cap, how the cap applies and what options you may have.

Individuals should also consider whether the amount sacrificed will attract Division 293 tax. This tax applies when you have an income and concessional super contributions of more than $300,000, or over $250,000 from 1 July 2017. Division 293 tax levies 15 per cent tax on taxable contributions above this threshold.

If you do choose to salary sacrifice into super, remember contributions don’t count when the payment is sent, only when it is received by your fund. Make sure your fund receives all your contributions by 30 June.

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Avoiding mortgage default

Posted on August 26, 2020 by admin

As individuals struggle with cash flow through the coronavirus, the Australian Bankers Association records that repayments on almost 500,000 mortgages have been deferred for six months. While repayments can be delayed, they cannot be avoided altogether.

Lenders can send you a default notice the day your repayment is overdue. However, they could also wait until your repayment is overdue by 90 or more days. When you receive a default notice, you are given 30 days to repay the amounts you have missed in addition to the regular repayment on your loan. Individuals who are struggling with their home loan repayments can avoid mortgage default by considering the following.

Contact your lender
Lenders are generally willing to work with you through financial hardship. Don’t be afraid to contact your lender to discuss your situation and find out what options are available for you. Lenders are often willing to negotiate short-term variations to repayment schedules that both parties can agree to. However, make sure that you do not agree to unrealistic repayment conditions that cannot be met.

Many Australian banks are offering a six-month deferral on mortgage repayments (including interest) for customers who are experiencing financial hardship as a result of COVID-19. If this is you, contact your bank to see if this is an option.

Apply for a hardship variation
Mortgage holders may be able to change the terms of their loan or temporarily pause or reduce their repayments under a hardship variation. A hardship variation can still be requested after you receive a mortgage default. To apply for one, contact your lender’s “hardship officer” and tell them that you wish to change your loan repayments due to financial hardship. This will usually require you to explain why you are struggling to make payments and to estimate how long your financial problems will continue to determine how much you can afford to repay.

After submitting a hardship variation request, your lender must contact you within 21 days with the outcome of your request. They may ask you for more details regarding your request; in this case, they must contact you again within 21 days from when you provide the additional information.

Consider selling your home
Selling your home is a tough decision, but in some cases this may be the better option if your circumstances are unlikely to improve. If you get to the point where your lender takes possession of your home and sells it, it’s likely that you won’t make as much as if you sold it yourself. When you sell your house on your own terms, chances are you will get a better price and avoid having to pay the legal fees passed on by your lender. Inform your lender if you decide to sell your home; they may ask for proof, such as a copy of the contract with your real estate agent or property advertisements.

Renting out your home until you can afford to make repayments again may also be an option if you are able to live somewhere else during this period.

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