24 Apr 2018
Investing in your super now may help you live the life you desire in retirement.
By the time you retire, your super will likely represent one of your biggest assets. It's real money and it's your money, so putting some thought into making contributions today may help you achieve the lifestyle you want in retirement. But remember that the money you contribute into super will be subject to preservation and not accessible until you retire.
While super might seem like basic maths – you just add to it – some contribution strategies might suit you better than others, so it’s important to understand your options.
1. Salary sacrifice (before-tax or concessional contributions)
Ask your employer if you can put more of your pre-tax salary into your super, above the Superannuation Guarantee (SG) amount of 9.5%. You’ll only be taxed 15%i on this amount. But remember that salary sacrifice will mean taking home less pay, in return for having more in your super.
2. Tax deductible personal contributions (before-tax or concessional contributions)
Similarly, following changes introduced from 1 July 2017, employees can now make a personal contribution to their super and claim it as a tax deduction, a way of contributing to super which previously only applied to the self-employed. Similar to salary sacrificing, you’ll only be taxed at 15%i on your contribution amount. If you choose to contribute in this way, you’ll need to fill in a ‘notice of intent’ form and send it your super fund before you submit your tax return.
3. Personal contributions (after tax or non-concessional contributions)
You can also make after-tax contributions to your super, and these contributions are not taxed as you’ve already paid tax on this income at your normal tax rate. You can only make after-tax contributions provided your total super balance is less than $1.6 million. If you earn less than $51,813, the government could make a co-contribution up to a maximum of $500.
4. The low income super tax offset
If you earn $37,000 or less a year and put some pre-tax money into your super, you might be eligible to receive a refund of the tax paid on your pre-tax super contributions (up to a maximum of $500) into your super account from the Australian Taxation Office (ATO).
5. Spouse contributions
Changes introduced on 1 July 2017 increased the income threshold for the tax benefits available when making spouse contributions. If your spouse earns $37,000 or less and you contribute to their super you could receive a tax offset of up to $540. Providing they earn less than $40,000, you could receive a partial tax offset.
6. Consolidating your super
Most of us have moved jobs at least once in our working lives and that can sometimes result in lost or missing super. You can do a lost super search to help you track down any lost or missing super and consolidate it into one super fund to bulk up your nest egg. But make sure you check whether there are any:
- exit or withdrawal fees from your existing funds
- insurance implications, such as making sure your required level of insurance is in place before you consolidate your super.
7. Review your super
Your super fund should be working for you, so it’s important to review it at least once a year. It's useful to:
- review your investment options and what other options are available
- look at your level of insurance – is it appropriate to cover your needs?
- pay attention to your fees and premiums, these can add up over time and impact your balance.
It’s important to be aware that limits apply when making super contributions. Make sure you’re aware of these contribution limits and how they might impact on both your ability to make super contributions and the amount you’re taxed on your contributions.
While there are many ways to boost your super, it’s important to know what’s right for your personal situation. We can help you achieve the lifestyle you want in retirement.