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Starting your first job in the new year? Here are 4 things you need to know

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Here are some expert money-management tips that no one tells you about when you start your first job.

Starting your very first job can be daunting at the best of times, let alone in a time where many people are working from home. As well as adjusting to the social and cultural aspects of work, there's a lot to learn in terms of your financial responsibilities too.

Here are four things you should be aware of in terms of your finances before you start your first job.

Sponsored by Aware Super. Winner of Money Magazine's 'Best Super Fund 2021'. We're an industry fund for all Australians. Our superannuation products support you from your first job to retirement. Choose a super fund with tobacco free, climate friendly investment options that strives to do well for you while also doing good for all. Learn more.

1. Your super fund is your choice

Your new employer might have a preferred super fund, but the choice is completely yours on which super fund you choose to join and how your superannuation money is invested.

You generally want to look for a fund with low fees and strong long-term returns. Your employer's default fund might charge higher fees than others in the market, so don't wait until you start your job to get your super sorted. It pays to compare super funds and join your chosen fund before you return your signed job contract and before your first day.

As well as fees and returns, you should consider how your super will be invested. If it's important to you that it's invested ethically, look for a fund that avoids investments in harmful industries while actively investing in companies that have a positive impact on the community and the environment.

For example, Aware Super is named a tobacco-free fund by Tobacco Free Portfolios and is actively divesting from thermal coal mining. At the same time, the fund is investing in renewable energy and new infrastructure projects that have a positive impact on the community while also striving for strong investment returns for members.

Also consider the other extras included. Many funds will include some form of insurance, but the options available will vary, and could include life insurance, income protection insurance, and total and permanent disability (TPD) insurance. Check whether there are exclusions in these policies that affect their suitability for you.

Super's an important lifelong investment, so make sure you've considered your choice carefully. Read through the whole product disclosure statement (PDS) to make sure it's the right match for your needs.

2. It's up to you to lodge your tax return

If you're an employee, your boss is required to withhold tax from your pay packet at your correct income tax rate each time you're paid. This means you don't need to worry about paying tax throughout the year, but you still need to lodge your tax return at the end of the financial year.

If you're a sole trader or you're employed as a contractor, your boss isn't required to withhold tax from your pay. This means it's up to you to set some money aside for tax throughout the year and pay it when you lodge your return. If you don't set any money aside for tax throughout the year, you could find yourself with a large tax bill at the end of June which is never fun.

3. There are things you can (and can't) claim on tax

Now that you've joined the workforce, you're entitled to claim any work-related expenses on tax at the end of the financial year. But before you go out and buy yourself a designer pantsuit or the latest iPhone with the intention of claiming it on tax, it's important to check what isn't considered a work-related expense.

In order to claim something as a work expense, it needs to be genuinely required to do your job (for example a uniform, tools or a hat if you work outdoors), something that you don't use outside of work and something that your employer doesn't already supply or reimburse you for. So unless you're working for a high-end designer and you're required to wear their products while working, you're going to have a tough time claiming a $3,000 handbag on tax.

4. You can choose to salary sacrifice some of your pay

Along with the money that your employer pays into your super (this is called the super guarantee), you can personally choose to divert some of your pay into your super fund as well. This process is called salary sacrifice, and it allows you to send some of your income into your super before your employer withholds any tax on the money.

There are a couple of benefits to doing this. Firstly, adding small amounts to your super regularly over your working life can greatly increase your super balance. For example, the government's superannuation calculator shows that if you start to salary sacrifice just $20 a week from age 25, you could increase your super balance by more than $62,000 by retirement. And if you start doing it from your very first pay check, you won't even notice the difference in your pay.

Secondly, that money will be taxed at the super rate of just 15% instead of your standard income tax rate, which could be more than 30%. Lastly, by sending that money to your super fund, you're also reducing your taxable income, meaning you'll pay less tax over the course of the year.

If you're interested in doing this, speak to your manager when you start your job about getting this set up along with your salary details.

Invest your super in a tobacco-free fund with Aware Super

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Unless indicated otherwise, the information in the table is based on data provided by SuperRatings Pty Limited ABN 95 100 192 283, Australian Financial Services Licence 311880.

*Past performance data and fee data is for the period ending Jan 2024

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