Victor Frankl - Man's Search for Meaning
After all putting extra money into your mortgage means you can pay off your debt quicker and save interest, but putting extra money into super builds your retirement nest egg.
Sounds like an impossible choice?
Well, relax, you’re not alone. The Government's MoneySmart website has a decision calculator dedicated to this thorny issue to help people think through their situation called, Super v Mortgage Tool.
If the idea of making additional contributions to your super fund hasn't crossed your mind yet, it will be only a matter of time before your friendly banking app will offer to help you ‘top up your super’.
The problem is, there are limits to how much you can contribute to your super and significant penalties if you get it wrong and breach the limits.
If you still have a home mortgage or credit card debt to reduce, perhaps you haven't got your Emergency Fund in place yet, we say consider your overall position first.
The government's MoneySmart website suggests - ‘Get the essentials in order. Before you put your extra money into super or your mortgage, seriously consider paying off your other debts and building an emergency fund first'.
This financial year (17-18) is the first time employees can claim a tax deduction for their personal super contributions, where previously only the self-employed were able to claim such a tax deduction.
While there can be a tax benefit to making a personal tax-deductible contribution to your super, it’s worth remembering that you’re then generally not able to access the money you put into your super until your retirement.
You can’t claim a tax deduction for:
The Government limits the amount you can contribute to super. If you exceed the limits you may pay extra tax. Concessional contributions are capped at $25,000 per financial year. This means the total of your employer and salary sacrificed contributions must not be more than $25,000 each year.
In order to claim a personal deduction, you'll have to get organised and follow these steps in the right sequence. We recommend you give yourself plenty of time to get it sorted and don’t leave this decision to the last week in the financial year to arrange.
In the following order, you’ll need to:
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