salary packaging – Money Guppy

Earning a six-figure salary assumes you earn a gross amount of at least $100,000 before tax is withheld by your employer. Generally when people are asked the question “How much do you earn?” the answer may come back as something like: “I’m on a low six-figure salary” - which would imply the person is earning between $100,000 to about $250,000 per year.“I’m on a mid six-figure salary” - which would imply the person is earning between $250,000 to about $700,000 per year.“I’m on a high six-figure salary” - which would imply the person is earning between $750,000 and $1,000,000 (a 7-figure) salary.“I’m on an average six-figure salary” - would infer that others in the same role are on six figures, and the person responding thinks they’re somewhere in the middle of the highest paid employee and lowest paid employee in their field and role. You might think this is a difficult task to achieve, especially if you’re earning minimum wage, but if we break this annual earning amount down to its monthly, fortnightly and weekly equivalent it might give you some idea on how close you might be to someone else earning that amount of salary. Six-Figure Salary Rates Per Hour, Week, Fortnight & Month A six-figure salary earning $100k would gross $8,333 per month, or $3,846 per fortnight, or $1,923 per week, or $51.2820 per hour if working a standard full-time 37.5 hour week (9am to 5pm Monday to Friday with a half-hour unpaid meal break). The tax payable in Australia on a six-figure income using the Simple Tax Calculator on the ATO website generates an income tax bill of $24,497, meaning an employee earning this amount in Australia would earn net of tax $75,503 (or have a tax rate of almost 25%). Due to the rate of taxation people on six-figure salaries tend to look for ways of legally minimising their tax payable by salary packaging. By sacrificing a portion of their earnings towards benefits they would either pay for after tax or can place in a lower taxing environment (such as superannuation) and paying for this before tax is calculated they can legally reduce their tax amount paid. How long though would it take for someone to work their way to a salary earning six-figures? We’ll look at two common scenarios: Comparing a $100,000 salary to the minimum wage (generally these are unskilled workers); andComparing a $100,000 salary to the latest median income in Australia. $100,000 Salary vs Minimum Wage When comparing a six-figure salary to the minimum wage in Australia (as at 1 July 2020), which is currently at $753.80 per week, or $19.84 per hour, this calculates to a difference of just over $60,800 per year on those earning minimum wage in Australia and those earning $100,000 per annum. Minimum wage employees are those who are yet to acquire any relevant skills, training or experience and have oversight and supervision over the work they perform. But how does this compare to someone earning the current median income in Australia? $100,000 Salary vs Median Salary If we compare the six-figure salary to someone earning the latest median personal income figure as released by the Australian Bureau of Statistics on 16th December 2020 for 2017/18 financial year, this means they would be earning the median salary of $49,805 with a six-figure salary being more than double! The median income does not mean the same as the average income in Australia. If we lined everybody in Australia up from lowest income to greatest income and then stopped at the person in the middle of that line, we would say that person’s income is the median income of all employees in Australia. How Long Does It Take To Earn A Six-Figure Salary? Looking at the above figures of the minimum wage and median salary in Australia we could apply a mathematical calculation to approximate how long it would take for both figures to exceed $100k. For the person on median salary receiving a 3% pay rise each year they would achieve a six-figure salary 24 years later. This would mean if they started working at the age of 25, by the time they are at the age of 50 they would be grossing over $100,000 per year. For the person on the minimum wage earning the same pay raise of 3% each year they would achieve a six-figure salary income in 32 years. This means if they start working at the age of 18 they would achieve a six-figure salary by the age of 50. How To Earn A 6-Figure Salary Quickly It should be no secret that to earn a six-figure salary you need to be earning twice that amount for your employer. You need to find something within the organisation you work for to see where the greatest need is, and how you can service that need with your skill set. I started as a teacher at a small school and where I could help and provide some assistance with something that I knew, or was even learning, I put my hand up to offer. By being involved in more and more tasks my employer could see I was capable and had the capacity to do more, such that when a position came up that I knew I could perform because of what I had done and shown I was easily able to get promoted. By constantly refining yourself and learning more about other skills that can help supplement you in your job you will similarly find opportunities within your own workplace, and if there isn’t then perhaps ask your line manager for additional tasks, or failing that look for other prospects outside of your current organisation. Conclusion Earning a six-figure salary may sound impressive to your parents and friends, but it comes with a degree of responsibility and if you achieve this type of earning towards the middle of your life you will find it spent on your children and on the mortgage. It can be quite easy to not be as spendthrift as you once were when on a smaller salary, and this is why regardless of whether you have a 5-figure, 6-figure or even 7-figure salary that you properly manage your money by budgeting. If you do start looking at finding better ways to manage your money then check out our free Cash Flow Forecast Google Sheet which can better equip you with handling your cash and organising your finances.