Super Saving Options
Savings in superannuation attract a number of tax advantages with the added bonus of helping you secure your financial future. It is important you understand that superannuation is a long-term investment as once you make a superannuation contribution, the money will usually not be available to you 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;
- personal after tax contribution;
- spouse contributions; and
- the government’s co-contributions.
Briefly, salary sacrifice is a way of saving with pre-tax dollars. You arrange for your employer to make a superannuation contribution from your pre-tax salary. There are restrictions on the amount of salary sacrifice (or concessional contributions) you can make. For people under 50 years of age this limit is $25,000 less the amount that your employer already contributes on your behalf, such as the complusory Superannuation Guarantee Contribution of 9%. If you are over 50, there are transitional arrangements that increase this limit to $50,000 until 30 June 2012.
Personal after tax contributions are contributions you make to your own super. They are made from income on which you have already paid income tax. 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 also restrictions on these non-concessional contributions (contributions where no tax deduction is claimed). Generally, the limit for this type of contribution is $150,000 per annum or $450,000 in a three year period.
Spouse contributions 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 for you 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 regime, while at the same time, creating a tax offset for the working partner.
The Australian Government’s co-contribution scheme provides an incentive for lower income workers to contribute to superannuation. For example, if you earn up to $61,920 per year and you make a $1,000 personal contribution to superannuation, the government may make a top-up contribution up to $1,000 direct to your superannuation account as a reward. To find out details of how these various arrangements work, visit the Australian Taxation Office.
If you are nearing retirement, seeing a financial planner is essential. A professional financial planner can help you to review your budget and retirement savings, and help you plan to achieve your retirement goals.
