She's On The Money - Can I Salary Sacrifice My Way to a Million Dollar Retirement?

Episode Date: September 1, 2026

Chats about super are slipping by the wayside, so we’re running it back for all the baddies who are ready to salary sacrifice for their retirement.  On this week’s Deep Dive, Bec and Victoria are discussing the power of your superannuation to completely transform your wealth today (as a lucrative tax vehicle) and well-into the future. The gang explains what superannuation is, how salary sacrificing works, and how you might work your wealth to better support your long-term investments. Tune in to hear about the First Home Super Saver (FHSS), the relevant contribution caps for the current income year FY27 and why your accountant keeps bugging you to make top-up payments to lower your tax bill. SUPERCHARGE YOUR SUPERANNUATION: There’s a playlist to help you do it over at https://open.spotify.com/playlist/4TDg1Pe0xmTbSlY3lD5p41?si=-ZIwE0GCTD-5MxixtVaaaw. SUPER 101: More of a scroller? Peep this blog on how to get your superannuation sorted. Search superannuation 101 at shesonthemoney.com/blog/. SCHEMIN? But, of course. Here’s more info about the First Home Super Saver scheme. Thanks ATO! https://www.ato.gov.au/individuals-and-families/super-for-individuals-and-families/super/withdrawing-and-using-your-super/early-access-to-super/first-home-super-saver-scheme New here? Follow us on Instagram (@shesonthemoneyaus) for Q&As, bite-sized advice, daily money inspo... and relatable money memes that just get you.  Acknowledgement of Country By Nartarsha Bamblett (nartarshabamblett.com.au) The advice shared on She's On The Money is general in nature and does not consider your individual circumstances. She's On The Money exists purely for educational purposes and should not be relied upon to make an investment or financial decision. If you do choose to buy a financial product, read the PDS, TMD and obtain appropriate financial advice tailored towards your needs. Victoria Devine and She's On The Money are authorised representatives of Money Sherpa PTY LTD ABN - 321649 27708,  AFSL - 4451289See omnystudio.com/listener for privacy information.

She's on the money. She's on the money. My name's Natasha Bambler. I'm a proud First Nations woman and I'm here to acknowledge country. Hello, beautiful friends. We gather on the lands of the Aboriginal people. We thank, acknowledge and respect the Aboriginal people's land that we're gathering on today. Take pleasure in all the land and respect all that you see.

She's on the Money podcast. Acknowledge is culture, country, community and connections, bringing you the tools, knowledge and resources for you to thrive. Hello and welcome to another deep dive episode of She's on the Money. the podcast that helps you feel more in control of your financial future, even if that future seems years or even decades away. I'm Beck-side, and joining me today is the brilliant Victoria Divine to discuss the topic that affects us all. Well, everyone living in Australia, of course. I'm talking about superannuation.

Super annuation. Super annuation. I say superannuation. But there's no... But there's no B. Superannuation? Superannuation. But I say superannuation.

I mean, you enunciated correct. Oh, that's the first time ever. Well done. Thank you. Well done. I don't know if that's the right way because, you know, like, how some words. I know. Yeah.

Anyway. Advertisement. Sorry. That's a different story. Or like some American states. Yes. I can't. I know.

Anyway. Too many pronunciations or potential. What about superannuation? Okay. So, well, more specifically, how one might get their super to work harder for them in the long run through salary sacrificing. Oh, sexy. Because if we've learned anything, it's that we're often rewarded for the duration of our investments,

not simply the amounts we contribute. You have learned a lot. I obviously am obsessed with superannuation. I love talking about it. I love being involved in it. I love being able to calculate at the end of a financial year, how much additional I'm able to contribute to make my cap, which is just really fun, but it's an absolute privilege to be able to do so.

But at the same time, right now money is really hard for people. And I'm finding that conversations about superannuation are slipping. And we need to be bringing them back to the forefront. Because if you've got no cash and you've got, you know, a really strict budget and you're just really scraping by, getting your super in order is something that you can usually do for free to put future you in a better financial position so that you don't have to be as stressed and you're still making money. Yes. Like you can still make your money work for you, irrespectively. of the situation that you're in right now.

That's so true. And knowing that kind of makes you feel really empowered, even if you are kind of living paycheck to paycheck. So, well, I feel like we've discussed superannuation a few times on the podcast, but I'm not sure if we've covered just how impactful salary sacrificing can be, depending on when you start. And I know a bunch of people in our community will want to know how it works. Exactly.

And I think I'll be really honest with you here. When I first started, she's on the money, I was not in the financial position to be able to salary sacrifice. In fact, once I went out on my own and was, a sole trader. I wasn't even paying myself any superannuation, even though I was on the podcast saying small business owners need to be paying their super because it's more of a do as I say, not as I do moment. Like I knew I was doing the wrong thing at the time, but I also didn't want to tell you that because I didn't want to give you the permission to be like, oh, it doesn't matter. But I think in

hindsight, it's important to talk about this stuff too because if you're a small business or if you're a sole trader or if you're not able to salary sacrifice and you just have a salary and pay as you go job and you feel bad about it, you shouldn't. Yeah. Because like we're all going through different seasons of life and sometimes it's harder and sometimes it's not. But I know unequivocally that the time and the energy and the effort that I spent researching and understanding my super and learning about it helped me build the investments that I have

today and helped me be able to identify when I was in a good position to actually be able to contribute to that. Because if I didn't know and I just kept putting off these salary conversations and these super conversations until, you know, maybe I had enough money, how do you know when you have enough money? Yeah. If you haven't already done the research and understood and like waited for a period of time where it's identified itself. Right. Right. So even if you're listening to this and you're thinking Victoria Divine, I do not earn enough or I don't have room in my budget. I can't be adding to my super. Stop putting pressure on me. Go, take the pressure off. I don't mind just by listening to this episode and seeking out different ways that you could potentially do it when you do have some

extra cash-hola. You're already investing in your financial future. You're already putting future you first. And that's really sexy. That's really cool. So I guess research is part of the decision making. So how deep are we going to go today? Okay. So firstly, We're going to break down exactly what salary sacrificing is, what it means, how it works, why it's so lucrative, and how much you might want to be investing now so that you can end up with maybe having a million dollars in your super by the time that you retire. Crazy. But before all of that, Ms. Beck-Syad, a tiny coffee break, if you will. I will. Welcome back, my friends.

Now, I do not want to tell this community how to suck an egg, but I do know a fair bit about finance. In fact, you could say it's my hyperfixation. You could say I'm obsessed with it. You could say. Yeah, like I live and breathe money, but more specifically, helping our community get rich. Yeah. And that's really fun.

But I feel like it might be helpful if in this episode we just go back to basics and I explain what salary sacrificing is from the top. I think a little refresher would be good. Good, good. All right. So, Beck, the second you get your job, first job, you're signed up to a super fund. I think we all remember the first job that we got and being handed a stack of forms and most of them not making sense.

But what you probably understood was, which bank account do you want the cash all to go into? And you were like, this is a money win. So subannuation is a compulsory system that was originally set up in 1992 to help provide Australians with financial support during retirement and to reduce Australia's reliance on the aged pension. So before this, lots of people were retiring and just relying on the government to pay them an income to live, right?

But because of population growth, because of how much our community is expanding, that reliance was increasing so significantly that we were going to run out of all of the money. So we needed to find a better way. And so renauation was introduced, right? So back when I got my first job, it was 9.5%. Since then, it has increased to 12%. So basically, every single pay that you get back, a little portion of it, that 12% to be exact, goes towards

your post-retirement self. And this is the superannuation guarantee. So superannuation guarantee is the minimum amount that needs to be contributed to your super fund from an employer. Right. But salary sacrificing is when you choose to have an additional contribution directed from your income. So you say to your employer, please put some more money into my super before tax hits. What this does is a number of things. Obviously, you're contributing more to your retirement, but it does lower your overall taxable income. And the amount that goes into super is only taxed at 15% instead of your marginal tax rate, which most people in our community, sit on about 30%. Yeah. So obviously that's some nice initial savings, but essentially

superannuation is not an investment back. And you would be like, wait what? Didn't you just say it was an investment, Victoria? That's what I'm thinking. Yeah. Like are you, you know, contradicting yourself, Victoria? No, because superannuation is just the vehicle, right? Yeah. So you have to put your money into some form of superannuation. Like a car. You could buy a Toyota. you could buy a Hyundai, you could buy a Mercedes. They're just different brands of car, right? Yeah. But what you're putting in the car and how you get from A to B is going to be different.

So superannuation is the system. And then in the system, you take that money and you invest it. So your superannuation isn't the investment. Your superannuation is the tax vehicle. And then the investment's what happens in the car and who you collect along the way. Okay. Yes, got you. So that tax vehicle can be used to help reduce the amount of tax that you pay on your income,

which is arguably, I don't know, a little bit sexy. Yeah. Less tax in my head, more better. So $1,000 outside of, like, let's say you put $1,000 in salary sacrificing and go straight to your super, 15% tax off that. Yeah. Then if you don't do that and it goes straight into a bank account, that's 30%. It's taxed. Yeah.

So on $1,000, that would be $300 tax that you pay. Yeah. If you were to have it hit your bank account. So you would only get, what, $700? Yeah. But you would get $850 inside the superannuation environment. God, that's good. Okay, so can you remind me of the tax we're paying at some of the lower brackets?

Yeah. So according to the current income year, which we are now in the 2026, 2027 financial year. Oh, but, Beck, if you earn less than $18,200 in one year, you meet the tax. tax-free threshold and you don't earn enough money to be paying tax. So you'll get all of those dollars into your account, right? Yeah. But if you earn more than that, but under $45,000, your income will be taxed at a rate of 15%. Okay.

So that's the same tax rate that's inside superannuation. If you earn more than that, but under $135,000 per year, you will be taxed at 30%, which is where most of our community sits based on everything that I've surveyed them on, right? So you can kind of see how stashing extra money in your super becomes a little bit sexy, right? Yeah. Especially with the more money that you earn. Yes, absolutely.

So if you've already been taxed at 30% or more, why not put some of that money towards your super where it'll be taxed at less and also help you in the future? I think it's a good deal. And, Ben, you might find that by salary sacrificing something like just 5% of every pay, could benefit you in the immediate future by lowering your tax rate without crushing your cash flow. But you really need to be working that out based on your earnings and your tax and your contributions and what your financial situation looks like. And this is like a point in time where I really wish that I had listened to my dad. Because growing up, my dad said,

Victoria, always save 5% of your income and pretend it didn't exist. And this is some of that I'm going to be teaching my kids as they get a bit older, like when they get their first jobs, I'm going to be like, let's pretend you didn't even get that 5%. And it either goes straight into an investment, straight into savings or straight into your like super. Because if I took 5% off you from the very beginning of your working life and you always just operated on the basis that you were earning 5% less than what you actually were, you never actually ended up spending that 5%.

Yes. And you're consistently investing. And like, had you done that to me? Yeah. At 14 years and nine months when I got my first job, I would be in a significantly better financial position than I am today. In saying that, my dad did tell me that at 14 years and nine months. And because I was 14 years and nine months, I knew better.

Right. Of course. So I think it's, it doesn't matter if you did or you didn't. But like if I was teaching kids about money or if I had some, you know, free cash flow and I really wanted to set myself up for success. And I was like, oh, well, I. am young and you know you're in this situation back if I started taking five percent off you I just know that you'd adjust your you're like your living situation and like the way that you spend

without compromising your lifestyle for sure so I'm kind of like well if I was in a financial position to do that maybe I would choose to so I think it's important that if you could change your situation you think about what you can do for future you as well even though it's like not that sexy because there's no immediate like, woo, I just got a new shoe. Like, do you know what I mean? Yeah, I know what you mean. So is there like a ceiling? Like, what if you do earn more than 100k a year? Yeah. Can you just throw like $55,000 into Suvar if you happen to have that extra money so you end up reaching a lower tax bracket? I love that you've just been like, well, if you earn more than 100 grand a year, you would just have 55 grand laying around.

Obviously. My queen, like, that's crazy amounts of money, but also very good question. And as of this financial year, the most you're allowed to contribute in addition to your compulsory payments is $32,500. Okay. So, like, if you want to make an extra payment, it is capped. So you can't basically put your entire salary in there and evade the Australian tax system. I see. That's why they are doing that. And they're also like, well, we want you to be well off in retirement, but we also don't want you to take the Mickey out of the tax system.

So let's say that you haven't hit the cap in the last five years as well. And this is something, full transparency, I took advantage of in the last financial year. Because as I said, everything else in my life has been a priority. Like when my husband and I were saving for our first home, contributing extra to my super didn't make sense because I was like, well, I'd have less money for the house that we're purchasing. And in this economy, Beck, absolutely not. And then for a lot of my working life or for the last, I'd say five years, as much money as possible has been going back into my businesses.

So I think a lot of people would be surprised at how much I don't take out. They'd be like, oh, well, we thought you would have this stupidly high salary. And I mean, Beck, I earn good money. But where I can, I'm leaving as much money as possible in the business so I can hire new people or invest in different resources and, like, grow and sustain my businesses. says, so my super was looking a little bit sad. Sure. And so I sat down and I spoke to my accountant and I said, how much carry forward have I got? So let's say that, you know, you haven't hit your cap in that last five years like I

hadn't. You might be able to carry forward any of your unused cap amounts. Okay. And then make higher contributions as like a once-off situation. Sure. But your super balance has to be under $500,000 to do this. And mine was too. Like mine was not looking as good as it definitely could.

And so I was able to take some of our, like, Steve and my savings and put it into my super because I was like, now's the time for me. And like as much as I want access to my cash, I also need to make sure that future me is really looked after. Got you. It's like rollover data. Yes. Yes. It is literally like roll over data for your super.

I see. I see. Okay. So hypothetically, if my super balance is at 70K. Yeah, and I've only just started salary sacrificing. You're saying I might be able to put an extra $40,000 into super this year because I haven't hit the cap leading up to it. Yep, absolutely. Okay.

Absolutely. Absolutely. And I mean, not everybody is contributing to their super to the max amount. So it's definitely worth working out. And on a lot of your superannuation websites, you will be able to log into your account and have a look at what carry forward you might have. you might not even have to talk to an accountant or a financial advisor, your super website might actually have the calculator there for you because they have all the information on your financial situation, right?

Right, right, right. Okay. So, and besides, like, paying less tax and putting money towards retirement, are there any other, like, benefits to salary sacrificing? Besides it being a very sexy tax vehicle. That's all these beautiful things. The first home super saver scheme. So if you're looking to purchase your first home, there's actually a scheme that exists

in every single Australian's superannuation already, and it is the first-time Super Saver scheme, which is a mouthful, but a very cool scheme. So basically you can contribute up to a maximum of $15,000 every year, up to a total of $50,000 across all years to this scheme. And what that means is that you will be able to put that money into your super and benefit from that tax offset. So instead, and you know how we went back to that $1,000 example.

If you're saving for your first home, every couple of $100 matters, right? But if you put $1,000 into your personal savings and you were taxed at that 30% that you and I were talking about before, $700 into your savings. True, true, true. If you put that into your first home super saver scheme, $850 into your savings. And if you're really clear on your goals and you're like, well, Victoria, I really want to buy a house, which one makes more sense mathematically? Genius. Which one are you going to end up with more cash in?

Well, sure. And obviously that extrapolates out for every $10,000 that you save instead of it being $7,000 in your savings account, that's $8,500 in super. Yes, true. So like, the more money that you get, the more impact. that it has. And if you're going to do this properly, like, you're going to end up in a better financial situation. And like, not all of us, I don't know many people, especially in the She's on the Money community, that are actually saving more than $15,000 per year towards their first time in this economy. For sure. So, like, I feel like that's reasonable. Totally. And you get

also the super that remains once you take out that money that you've put in. Yeah. It gets all the interest that money's... Hot. Exactly. And I mean, and I mean, and I mean, I mean, I am all for championing a woman buying a house on their own. But hypothetically, if you're buying with a partner, that $50,000 cap becomes $100,000 across both of your super. So you've got $100,000, which means you could be much better off financially if you use the system. And if you're going to do it properly, please just, I'm just all about dotting your eyes and crossing your T's because technically any additional contribution that you make to your super fits this scheme.

But every super fund is different, right? So if you're going to do this, please just like call your super fund, have a chat with them, or log in online, and request what's called a first home super saver scheme determination before owing

and like planning for the property. So all you have to do to like get the money back out of your super is fill in a form and it might look different for different super funds. But fill in a form they'll release the amount

and then you buy the property. God, that's so good. And you can like talk to your bank about where your like home deposit is sitting. Like you can come and talk to a broker and be like, yeah, I'm using the first home super saver scheme. And we can see that in the same way that we can see your savings. It doesn't change anything. That's so, so good. Isn't it sexy? Yeah, that's really helpful. But it actually blows my mind when I get first home buyers who meet the criteria who are like, no, I can't be bothered. I'm like, babes, free money.

Free money. That's so good. Makes no sense. Like, a way. A way. A way. A way. It makes no sense. Like, a we not meant to be using everything to our own advantage? Absolutely. That's what's there for, isn't it? Well, that's what I thought. Well, I mean, like, technically it's going toward your future and arguably, having shelter might help you continue to earn money until retirement. Exactly.

And there are some other circumstances where you might need access to your super early Beck. So, like, knock on wood that this never happens to you or anybody in our community, but you might need to access your superannuation. on what they call compassionate grounds to pay for medical treatment for you or a dependent. Or if a dependent passes away, super can be accessed to pay for like funeral costs or to prevent the forced foreclosure of a sale of a home, that sort of thing. So those things suck, but like how good that we can lean on that cash if we really need to. For sure. And it can also be accessed during

times of extreme financial hardship, but there are a whole bunch of things that need to happen before you're legally allowed to access this money before retirement. And just because I said, oh, like financial hardship, like you could access your super and you might like have some bells dinging like, oh, I could access that. No worries. Like if you can not do that, it's way better. Like I would be trying to avoid it at all costs. But at the end of the day, like if it is extreme financial hardship. I'm very glad that you have access to that. Absolutely. And from memory, you have to be on Sending for like six months beforehand. You have to be in debt. I don't know. It's a whole thing. Yeah, there's a whole thing. Yeah, long list of things you've got to tick off.

And like I think some people look at it and go, oh my God, like I would love to do that. And it's, I don't know, it's like your financial future. And don't get me wrong in the short term, it feels like it's like a band-aid and you just rip it off and you take it. And it like it just is what it is. But there are so many people who during COVID took money out of their superannuation because they made it much easier to do so. And don't get me wrong, lots of people benefited from it in the way that that scheme was intended to be benefited from. Yeah. But a lot of people were like, oh, I can get cash out of my super. I'm just going to do that and now deeply regret it. I'm one of those people, that's for sure. But like it wasn't, and that's just like a whole side

conversation. I feel like the marketing around that, the conversations around that, they weren't like, hey, Beck, are you aware that, like, this is a really, like, negative thing to potentially do? Yeah. Like, you basically saw it and they were like, did you want, like, the way that it felt from my perspective was, hey, Beck, do you want 10 grand out of your super? Yes. And you were like, sure. And they were like, great, no worries. All you have to do is fill out this form. And you were like, oh, easy. Thanks. Yeah, it's so true. Like, that's what it felt like, right? It was too easy. Yes, exactly. And you're like, why the hell not? And now lots of people are like, Victoria, had I known, I wish I hadn't done that.

But like, don't crucify yourself. That's not the end of the world. That's very sweet. Thank you. So, okay. Well, you know, that was not good. It was not good. But hopefully we won't need to access like that earlier than retirement in the future.

Hopefully no more pandemics where they're giving it away willy-neilly. Exactly. And fingers crossed, no one needs that early access. Exactly. but let's also reframe that situation by asking the question, all right, Beck, how much money do you want to retire with? Yeah, it's a great one. Like, well, I always think a million because you have said a million,

and so I'm like, you don't need a million. That's a very large number that, to be quite honest, most people in Australia do not retire with. Like, that's not normal, Beck. 500,000. Like, that's a good goal. Good goal. I mean, you're young and hot.

hopefully getting rich. But I feel like having a goal of a million dollars at your age is actually quite reasonable and puts you in a really good financial position. But I also am acutely aware that a lot of people will be like, Victoria, that's unrealistic. And I'm like, well, is it really unrealistic if people have done it before Beck? Right, right, right. Like if other people can do it, we can do it. Yeah.

Like how hard could be? Boys do it. Yeah. Like, that's not that deep. No. But I think the conversation. needs to change around retirement because if we look at like, and we'll get into it, but like, if we look at what works out to be reasonable, it's a lot different to what I talk about on the

podcast because, like, as we know, the government believes that the Centrelink income is enough to live a good life. Would you say that it is? I would say definitely not. Exactly. So like the numbers that the government recommends. are going to be the bare minimum, if that makes sense. They're going to be like, okay, cool, you're not living in an area that you really want to

live in. You're not putting the food on the table that you would really want to put on the table. Like, you're not having the life experiences that I believe you deserve. Yeah. And, like, that might be the life you want to lead. And, like, pop off queen. I'm here to give you options, though, and kind of help you see that maybe that might not be enough.

Yeah. But it also depends really heavily on the type of lifestyle you want in retirement. Sure. And when I was a financial advisor, I used to sit down with clients and be like, well, what does that look like? Like, Beck, are you going to buy a caravan and then, you know, drive around Australia for your retirement and just stay at free camping locations and, you know, put a few snags on the Barbie? Or are we going to Europe every Christmas? Are we, you know, skiing in the Swiss Alps? Like, what does that lifestyle look like?

Because that's going to determine what you need. And obviously, if you're just going to live love, laugh around Australia, the income required for that is very different to someone who wants an international holiday of luxury every year. Yeah. So, let's get into some research. According to the Association of Superannuation Funds of Australia, for a comfortable retirement, singles will need to have $55,923 a year during retirement, while couples apparently will need $7,000. $28,566 to live a comfortable life. But this, again, I think is outdated because this number presumes that you own the roof over your head and you aren't making mortgage or rent repayments. True. Yes. Yes. For sure. So like that doesn't make sense in an economy where most millennials

are now struggling to buy property. Most, you know, Gen Zs are, you know, maybe considering not even having that. So you might need more than that. So if you're, renting, this figure is going to climb by about 40% for you to have what they call a modest lifestyle. So that's not like a life of luxury. That's just like bare basics. Everything's going well. And caveat, I really just don't want this episode to be scary for people because you do have so much time to fix things and so much time to put yourself in the best possible position. But these numbers are big. And you can instantly be like, but Victoria, I only have $32,000 in super. What am I going to do, girl, that's why we're besties. I got you. Yeah. Like, it's okay. It's okay. It's okay. That's why

you're here, right? Because you want better for yourself and we're like building towards a more secure financial future. But if you wanted to look at this total superbalance at retirement and you don't have a house, this works out to be roughly $630,000 in superannuation for singles and $730,000 for couples. Now, when I say a comfortable retirement, I mean that you have enough money in order to have some occasional takeaway meals, maybe to go to the movies, to go to dance classes if you really want to. Because like, you know what happens when people retire? They're like do stuff they've never done before.

Hell yeah. I love it. But also, we need to pay for those experiences. That's true. Comfortable means having enough coin to get, you know, a nice haircut. pretty regularly, having a good level of private health insurance and having enough money maybe for an overseas trip now and then. It's definitely not, like if I look at the budgets, it's definitely not every year, but like you're not going to have them. So that's where

comfortable is looking. So now I kind of get why people are always aiming to retire on a million dollars. Yes. Because that figure feels relatively safe and kind of with a buffer. Yes. And that's why I often pick that million dollar figure, because I go, I know it's seven figures. I know it's really scary, but if you can work towards that, you're going to be quite comfortable. And if you are retiring with a partner, Beck, $2 million do you go, old one. Yeah, okay. So I'm going to get a little bit further into that and what we might salary sacrifice to reach that goal at retirement right after this break. So guys, don't go anywhere. All right, Ms. Beck, Syed. Let's do it. Have you digested all of the information that I have thrown at you so far? Yes, yes, I have.

We have covered the benefits. We've covered the definitions. We've covered, you know, why we might be looking at doing the maths on a million as opposed to 500,000. You're like, okay, I now think that maybe a million is what I would like to aim for. I'm going to aim for it, but I, like, hey, you know. Shoot for the stars. Shoot for the stars. And maybe you'll land on a moon or something they say.

I think they say, shoot for the moon, and you'll land among the stars. Oh. Which makes a lot more sense. Yeah, I guess it does. But we don't need to make sense. We need to make money. Exactly. Right.

All right. So let's do a little example. Let's say that you are 24 years old and you might have what, seven grand in super. Sure. You earn, let's say, $64,000 per year before tax, right? Good example. Your employer makes the compulsory 12% subrenuation contribution. That means that every year, seven,

$7,680 is going into your super. Your salary sacrifice that you've chosen might be 5% of your gross annual income. Do you remember the difference between gross and net? Gross is in total. Yes. Why? It's a gross amount of money. Yeah, to look at and what you're missing out on.

And what you're missing out. Exactly. Yeah, yeah. So like for those of you who maybe missed that on a previous podcast episode, I said that the way I see gross and net when we talk about it is gross. amount of money is really disgusting and gross because that's how much money we're not going to end up within our bank account. And the net is like kind of what we scooped and got to keep in our bank account. Great call. Great call. Right. So your salary sacrifice is 5% of your gross income. Okay.

Makes sense. So that's $3,200 a year into your superannuation. All up on an annual basis, you're contributing $10,880. Mm-hmm. We then are. apply our 15% tax on concessional contributions. That's $1,632. Your net contributions for the year then become $9,248. Yeah, got you. Cool. So we're doing the maths? Yeah. Just to really quickly recap, concessional means not compulsory. Like you don't like you don't have to. Yeah, which is why it's only like $1,132 because it's on the amount that you didn't have to contribute, but you've chosen to. Gorgeous, gorgeous, gorgeous.

So now we're at the net contributions because we've taken out our tax. So you're adding $9,248 into your super every year instead of the initial amount that I quoted, which was $7,680. Got you. Okay? This behavior is going to grow your contributions from $92,480 in 10 years to $3,000. to $369,920 over 40 years. Oh my goodness.

That's pity. And because the average long-term growth rate for standard super funds is typically between 7% and 9% every single year, this figure not only grows by, let's say, 7% yearly, that growth is compounded. So the money that your money made then makes money. And that's what compounding is. So every dollar that you earn, then earns you more money. So remember, you had seven grand in your super before doing any salary sacrificing. So your new total, including your contributions, is $16,248. Yes, okay.

So that's that initial seven grand that you had, plus the $9,248 that you've added in this financial year. Multiply that by the 7% annual growth. And we always go with like the lower number. I want to say this is for illustrative purposes only, just as an example. example, I'm just doing some maths. This is not a specific super fund. This is not a recommendation. This is just me doing some maths multiplied by that 7% annual growth. That's $1,137.1.1.1.1.1.1.1.1.1. First year, you're going to have $17,385. Okay. Year two, $28,497. and year $40,386.

Whoa. So you go, oh, $40,000 after three years. I've been contributing so much. That's so disappointing. It's not like $40,000 is a lot of money, but over the long term, this adds up, Beck. And when I say this adds up, I mean doing the maths on the day you retire at 65, which is the common retirement age. It's also the age that you can access stuff.

You're on track to having $1.2 million in your super. That's crazy. That's crazy. Just by adding 5%. That's so wild. Right? And as I said before, for some people, adding 5% is not going to change their lifestyle at all. We're just going to pretend we never had that cash.

Oh my God. That's wild. Okay. So I guess like in the grand scheme of things, you're only sacrificing around 3,000 a year before tax event. Before tax. And you get a little tax deduct. at tax time. And so if I say, oh, Beck, do this, you're probably not going to notice it.

And then at tax time, you get some cash-a-loor in your account. Deal. It seems like maybe you wouldn't be that much worse off with your take-home earnings. But it seems to all out up in your super. Yes. It doesn't take things like pay rises into consideration. Exactly. If you stayed on this forever.

Yeah. Exactly. I'm just assuming that you never change your income. Yeah. Which is what I would want to do. Because in my ex-financial advice life, I would always want to underpromise over-deliver. Of course. Like I'd always want to make sure that I was kind of like promising you the bare minimum.

And then if you exceeded it, I'd be like, I knew it, but I also just didn't want to bank on it. Because like we never bank on stuff like that because I can't promise it. For sure. Right? Like I don't know if your job is going to go, oh, no, no pay rises this year. And what if I was banking on your finances changing next year to put you in a better sign? situation. It's terrible. Like, that puts you in such a significantly better financial position and I just, I'm so excited about it. Yeah. Do you want another example? Sure. Like do some more

maths? Sure. Because not everyone in our community is 24 back. That's true. And they will all be like, but I didn't start then. And that is cool. So let's say you're my age. We're aging millennials. We are 35 years old. And let's say you have a superannuation balance of $33,000. And then you've got an income of 85 grand year, which seems to be pretty standard for people who are in that 35-year age bracket, right? And this is where we're doing the maths. Your employer is going to make the compulsory contributions of 12% to your super. So every year, they are contributing $10,200 on your behalf.

Gorgeous. Minimum. Then let's say you change your budget and you've told your employer, I really want to contribute 5% of my gross annual income. So my total annual income. So that's $4,250 a year that you're going to contribute into your super. All up, that is $14,450. Okay.

Right. Then we do our tax. So that's 15% on your concessional contributions, which is approximately $2,168. So then the net amount or the total amount you end up contributing to your superannuation that year would become $12,200. $183. Yeah. So that's what we're working with now. Okay.

This behavior, Beck, grows your balance from $122,825 in 10 years to $368,475 in 30 years. Amazing. And that's not even taking into account any kind of like performance of your super fund. Like that's, again, just the bare minimum basics, like the bare minimum maths. right? Yes, okay. But we want to remember that you had $33,000 in your subrenuation when you began before you started salary sacrificing. Yeah. And I picked that amount because that is what a lot of people are like V. I only have, you know, 30 grand or I only have 40 grand in super. There are some people in our community who are running rings around that, as they should,

icons, but imagine the power. Yeah. If they added more to what they're already doing. For sure. Rich, rich, rich. Rich, rich. But your new total, because you had that $33,000 in your super fund to begin with, so your new total, including your additional contributions that you're now making, is $45,283. Yes?

Okay. Then we look at that 7% rate of return that I really like working with. That's about $3,170. First year, you will have $48,453. Then the year after that, you'll have $64,987. Then the year after that, you'll have $82,679,000. And you're going, oh, V, like, is that enough? Well, yes, it is, my friend, because if your super fund performs better than 7%, you'll end up with more money, money win.

But if it doesn't, that's okay because you are actually on track to hit a million dollars by the time you reach the age of 67. Wow. That's wild. So you'll still hit a million dollars. Oh my God. But it's just over the long term we need to commit to this. Yeah. And that doesn't take into consideration any like pay rises or like any additional contributions. Like if one year your super fund performs by 8% instead of 7. Or like my super fund, which a few years ago was doing like 14%. Yeah. Thank you. And I mean, that doesn't take into consideration as well the fact that some years your super fund is going. to underperform. Sure. But that's okay because over time, it all balances out. We're not worried about that. Not worried about that. We're not worried.

Oh my God. That's incredible. Really snowballs. It does snowball. Like, it just picks up and picks up and picks up. And then all of a sudden, that's going really fast. And crazy, what they say in superannuation, and this is called the rule of 72. And maybe I'll do a whole podcast episode on this because it's like a really cool,

like mathematical concept. I just said that aloud. And I was like, no one's going to care, Victoria. Anyway. Essentially, because of the. the rule of 72, your money will double every 10 years. Yes. So, like, if you can get to a million dollars by the time,

or a million dollars in your investments by the time you're 60, and you're like, well, V, I'm 60 and, like, 70's the new 60 and, like, 80's the new 70. Yeah. I actually want to work until I'm 70. Well, by the time you hit 70, you'll have $2 million. That's insane. I can't even, it just feels like magic. Like, it doesn't feel real.

But, okay, I'm trusting you. But, like, that's why. But that's why, competition. Interest is so hard for humans to wrap their heads around. Yeah. Because it just genuinely feels fake. Yeah. So you go compound interest.

And also, if you put your money in today, you're not going to see the returns tomorrow. Like it'll just be like sense and you'll be like, what's the point? Mm-hmm. But you've got to trust the process. Trust the process. Trust the process. Trust me. I promise.

Does every employer do salary sacrificing or is it like something you just request? It's just something you can request. Okay. Amazing. You can just do it. And also, if you're like V, I don't. know if in my budget I can afford to do this like salary sacrificing through my employer because like, you know, they'll take it out of my pay and like some months I need it. You can always just

literally be pay money to your super on a monthly basis. True. And then at tax time, claim it back. Hell yeah. So like it can be really easy. And I think a lot of people think the second it becomes super, it becomes really complex, but it's not, I promise. So like the longer you do it, the more time it has to grow back. That's so cool. So back. Summary. What have we collectively learnt today? Okay, so that contributions before tax can not only lower your tax income, but they can create compounding wealth in your super. So we're going to get rich.

We're going to get rich. And they're retiring with a comfortable amount in your super is a personal thing, and it depends on what you want your retirement to look like. Exactly. I don't know about you, but what does my retirement look like? It's looking bright. Hot, smart, rich. Yeah, girl.

Exactly. And maybe your super is actually the key to unlocking that, like, really intimidating million-dollar figure that we are not, you know, really feeling comfortable with still. But, like, salary sacrificing could help you get there. All right. I feel like I've used terms like superannuation and earlier mathematical concept and called it really cool. So I'm calling it time. I think that that is all we have time for today. I'm going to have to put your time out.

Yeah. Yeah, yeah, I'm putting myself in time out. I also really want to do some maths on the rule of 72 because I'm wondering if that could actually be a whole podcast episode because in my head it's still cool. I can't love you still to do maths after this. Yeah, I'm the daughter of an accountant. Can't stop it.

Guys, if you found this episode really helpful or maybe you learnt something new, please let us know by leaving us a cute little review. Maybe tell us what your, like, in the Spotify comments, what your 5% contribution could look like. I would love to see it. Thanks as always for being part of our gorgeous community. Guys, make sure that you're subscribed so that you never miss a deep dive episode.

We will catch you on Friday for another edition of Friday drinks. Till then, take care of yourselves and of each other. Bye guys. The advice shared on She's on the Money is general in nature and does not consider your individual circumstances. She's on the Money exists purely for educational purposes and should not be relied upon to make an investment or financial decision. If you do choose to buy a financial product, read the PDS, TMD and obtain appropriate financial advice tailored towards your needs.

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