The rules and regulations in financial planning are complex, and I see it as my role to help de-mystify the retirement process for my clients. Breaking down the issues relevant to each individual allows them to better understand, and benefit from, the opportunities available to them.David LukeFinancial Planner SSFS
Building Your Wealth
Achieving the lifestyle you want when you come to leave full-time work doesn’t just happen. You need to plan for your future. But where do you start? Savings in superannuation attract a number of tax advantages with the added bonus of helping you secure your financial future. It’s important you understand that superannuation is a long-term investment. Once you make a superannuation contribution, the money will usually not be available for you to access until you reach your prescribed preservation age and retire.
There are a number of ways to save within the superannuation system that can enhance your savings. Four of the most popular are:
- salary sacrifice & concessional contributions caps;
- personal after tax contributions;
- spouse contributions; and
- the government’s co-contributions.
Salary Sacrifice & Concessional Contributions Caps
One way to accelerate your retirement savings is to consider salary sacrifice. Salary sacrifice is simply a way of saving with pre-tax dollars. You arrange for your employer to make a superannuation contribution from your pre-tax salary. It’s important you are aware of the restrictions on the amount of salary sacrifice (or concessional contributions) you can make each financial year. If you do go over your Concessional Contributions Cap there are penalties which will apply.
The Federal Government has introduced new rules regarding the amount of concessional, or before tax, contributions you can make tax effectively to your super. From July 2014, the maximum concessional contributions you can make to super is $30,000, unless you were age 49 or older on 30 June 2014, in which case it is $35,000.
Concessional contributions include your employer’s super contributions, such as the compulsory Superannuation Guarantee of 9.50%, insurance premiums, any salary sacrifice amounts you make and any personal contributions for which you claim a tax deduction.
What Happens If I Go Over the Cap?
It’s important you don’t exceed your concessional contributions cap. If you do, your excess contributions will be taxed at your marginal tax rate plus an interest charge. The excess contributions can be refunded to avoid also being counted against the non-concessional contribution cap.
Are there different rules for members of the public sector superannuation schemes?
Special conditions apply for members of defined benefit schemes. Select your fund from the list below to find out details for your scheme.
Personal after tax contributions
Personal after tax contributions are contributions you make to your own super. They are made from income which you’ve already paid income tax on. These contributions include 'one off' contributions which may be made as the result of selling a property, receiving an inheritance or winning lotto. There are restrictions on these non-concessional contributions (contributions where no tax deduction is claimed). Generally, the limit for this type of contribution is $180,000 per annum or $540,000 in a three year period.
These are after tax contributions you make to the superannuation account of a non-working or low income spouse. A contribution of $3,000 or more can entitle you to a tax offset of up to $540. If your partner is out of the workforce, for example caring for small children, this is an excellent way to maintain a long-term savings plan while, at the same time, creating a tax offset for the working partner.
The Government’s co-contribution scheme provides an incentive for lower income workers to contribute to superannuation. For example, if you earn up to $49,488 per year and you make a $1,000 personal contribution to superannuation, the government will make a top-up contribution of up to $500 direct to your superannuation account as a reward.
It’s important you speak with your financial planner who will help you decide which of these, or perhaps another strategy, is best suited to your individual situation. Give your member service team a call on 1800 620 305 and find out the best strategy to help you achieve financial security now and into the future.