Why is Super so important
Superannuation is a way to save for your retirement. The money comes from contributions made into your super fund by your employer and, ideally, topped up by your own money. Sometimes the government will add to it through co-contributions too.
Your employer's superannuation contribution is 9.50% (July 1st 2014) of your salary which goes into a super fund. This is called the Super Guarantee and it's the law.
Over the course of your working life, these super contributions from your employer add up, or 'accumulate'. Your Super money is also invested by your Super fund so it grows over time. When you retire, you will have money to live off - a nest egg.
Super is a lifetime investment that has many benefits. Your financial planner will help you to make the most of your super and maximise the benefits for you.
Clever Super strategies to consider
- Consolidate your Super - It's much easier to keep track of your money and also less fees if your super is in one account.
- Beef up your Super savings - The before-tax contributions (also known as concessional contributions) you make, and performance returns you may earn inside Super are taxed at 15%. For many people, saving through Super is much more tax effective than saving the same amount outside Super.
- Salary Sacrificing - This simply involves agreeing with your employer for some of your pre-tax salary to be paid directly to your Super fund, before income tax is deducted. This should reduce the amount of tax you pay. For more information refer to salary sacrificing - boost your retirement funds.
- Spouse contributions - In many cases one spouse accumulates the lion's share of the super. Boosting your spouse's Super can reduce your family's annual tax bill.
- Tax rebate for additional spouse contributions - If your spouse earns less than $10,800 pa, you can make a $3,000 after-tax contribution (also known as a non-concessional contribution) to their super account. This may qualify you for a tax rebate of $540. This strategy can be used each year.
- Co-contributions - let the government top up your super. People who earn less than $33,516 (2015/2016) a year can potentially receive a $500 helping hand from the government via a free 'co-contribution' into their super fund. If you earn $33,516 to $48,516 (2015/2016)a year, you can still receive a super co-contribution but it will be adjusted depending on your income and how much you personally contribute. The thresholds will increase to $ 34,488 and $ 49,488 in 2015/2016).
- Take a long-term view - Super is generally a long-term investment (i.e. seven years or more). And since you can't access your money until you retire, you might want to think about using a growth investment strategy.
- Beware of the caps - There are caps on the amount of concessional (before tax) and non-concessional (after tax) contributions you can make each year. Please contact us for more information on concessional and non-concessional caps.
How tax-effective is super?
For most people, saving through super can be much more tax effective than saving the same amount outside super. Firstly, any contributions your employer makes (up to a certain limit) and any returns on your super are taxed at a maximum of 15%, rather than your marginal tax rate which could be as high as 47.0%.
Receive bonus contributions from the government
If you put your own after-tax money into super, you could receive a government co-contribution, depending on how much money you earn.
Beware of the caps
There are caps on the amount of concessional (before tax) and non-concessional (after tax) superannution contributions you can make each year. Please contact us for more information on concessional and non-concessional superannucation contribution caps.
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