Superannuation can be one of the most tax effective ways to build your retirement nest egg. There are a range of strategies you can consider to boost your super savings.
If you’ve had several jobs since you started working, you may have money in more than one super fund. Having more than one super fund means you could be paying unnecessary fees and insurance premiums on each one. Combining all your super funds into one can make your super easier to track, simpler to manage and ensure you save on fees and charges.
Keep in mind, certain lost super accounts with balances of less than $6,000, as well as the balances of members not able to be identified by their fund, are automatically drawn together by the Australian Tax Office (ATO) to reduce your account fees. In addition, from 1 July 2013, the Government started paying interest linked to the Consumer Price Index (CPI) on all lost super accounts
reclaimed from the ATO - so your lost super savings will keep pace with inflation.
One way to find out where your super is located is by checking the statements you have received from each of your previous super funds or by calling your past employers. If you can’t trace your super, it may be classified as ‘lost’. Your super may be considered ‘lost’ if:
You can check whether any unclaimed or lost super belongs to you by visiting the myGov website (mygov.gov.au) or asking your current super fund to conduct a search on your behalf using a system called SuperMatch2. You might find a handy sum to boost your super!
Do some housekeeping and make sure your super fund has your tax file number (TFN). This will make it easier to find lost super, move your super between accounts and receive super payments from your employer or the Government as well as make personal contributions. Once you’ve tracked down all your super, you need to decide which super fund best suits your personal and financial circumstances. Before deciding on a fund, compare the costs and benefits of each.
There are four important things to consider before moving your super:
Currently, most employees receive super guarantee (SG) contributions from their employer of at least 9.5% of their salary. Adding to these contributions directly from your gross (pre-tax) salary can be an easy and tax-effective way to top up your super. This is called salary sacrifice.
Some of the benefits of salary sacrifice are:
You should check with your employer first to see whether salary sacrifice arrangements are available and that adopting a salary sacrifice strategy will not reduce the amount of SG contributions your employer pays on your behalf.
You can generally claim a full tax deduction for personal contributions you make to super. While still subject to the concessional contributions cap, this strategy may prove timely if you have made a considerable capital gain from the sale of a property or shares – as your deductible contribution to your super fund may help to offset your assessable capital gain. Not only could it reduce your marginal tax rate, it may also boost your super balance for retirement.
Personal tax-deductible contributions can also be a flexible way of maximising your concessional contributions near the end of a financial year.
Note that if you are not able to claim your super contributions as a tax deduction (for example, your income for the year is too low), they will be treated as after-tax (non-concessional) contributions.
To make a personal tax-deductible contribution, you need to submit a valid deduction notice to your super fund within strict timeframes, and have it acknowledged by your fund in writing.
To encourage you to save for your retirement, if your total income is $36,813 pa or less and you make a $1,000 after-tax contribution to super, the Government will generally contribute $500 to your super.
The co-contribution is calculated as 50% of your after tax contribution, but the maximum $500 government co-contribution also reduces by 3.33 cents for every dollar you earn over $36,813 pa and ceases once your total income reaches $51,813 pa.
When determining eligibility for the Government co-contribution, earnings that are salary sacrificed to super and reportable fringe benefits come under the definition of total income. If you fit within the income thresholds outlined above, and satisfy some other conditions, contributing to your super from your after-tax salary before the end of the financial year may be a great way to top up your super, and get an extra boost from the Government.
We can give you the latest updates and more information on this opportunity.
If you have a spouse, you are permitted to transfer certain super contributions from the previous financial year over to the super account of your partner. If the receiving spouse is over preservation age at the time of the split request, he or she must declare that they are not retired. Splits cannot be done once the receiving spouse turns 65. You can do this every year,
generally once the financial year has ended. Up to 85% of taxable (concessional) contributions such as SG, salary sacrifice and personal tax-deductible contributions made to super can be transferred.
There are several reasons for considering splitting super with your spouse:
Super splitting is not offered by all funds, so you will need to check whether your fund offers this feature.
Another potential tax concession is a spouse contribution tax offset. This strategy may be available if you make after tax contributions directly to your spouse’s super account – these are known as eligible spouse contributions. To take advantage of this strategy, your spouse will need to be under age 65 or aged 65 to 69 and have satisfied a work test during the financial year. You can open a super account in your spouse’s name and make contributions to that account from your after-tax pay. You can also make these contributions to your spouse’s existing super account.
If your spouse’s assessable income, reportable employer super contributions and reportable fringe benefits are under $37,000 pa, you will receive an 18% tax offset on the first $3,000 you contribute on their behalf, up to $540 pa. The offset operates on a sliding scale and phases out to zero once their income exceeds $40,000 pa.
When considering any super strategy, it’s important to assess how much you are contributing to super in any one year. The Government has set annual limits – known as contributions caps, and additional tax may apply where you exceed the caps.
The contributions caps for the 2017-18 financial year are:
In order to make voluntary super contributions, at the time of the contribution, you must be:
Voluntary contributions generally cannot be made once you have reached age 75.
Compulsory contributions (e.g. Super Guarantee) can be made at any time regardless of your age.
It’s important to keep your financial adviser informed about any super contributions you make so they can ensure you don’t exceed these caps. Contributions over these caps can be taxed at up to 47%.
When assessing your concessional contributions you will need to include all employer superannuation guarantee contributions from any employers over the year and any salary sacrificed amounts, as well as personal contributions for which you will claim a tax-deduction.