Smart Strategies for EOFY 2017/2018: Superannuation
With 30 June fast approaching, we've put together five smart strategies that may benefit you now and help boost your super.
Why is boosting your superannuation savings a good idea?
There are tax and other benefits to saving more in super. Once your money is invested in superannuation, the earnings it makes are taxed at a maximum rate of 15% (instead of your marginal tax rate, which may be up to 47%). This lower tax rate means you are able to build up your retirement savings more quickly.
When you do retire, you will be able to transfer your superannuation into a 'retirement phase' pension where you won't pay tax on investment earnings or income payments received from age 60 onwards.
So, what can you do to boost your superannuation now? Here are five strategies:
Make an after-tax superannuation contribution and claim a tax deduction
If you are employed, self-employed or earn taxable income from other sources (such as investments), you can add to your superannuation and get a tax deduction. This means you could pay less tax on your income now while increasing your retirement savings. In previous financial years, a deduction was only available if you earned less than 10% of your income from salary and wages.
Arrange for your employer to contribute some of your pre-tax salary or bonus into your superannuation as part of a salary sacrifice agreement
If you are an employee, adopting this strategy will enable you to get more from your salary or bonus by reducing the amount of tax you are paying on your salary and bonus now while allowing you to increase your retirement savings.
Convert your savings into superannuation savings by making an after-tax super contribution
If you have money outside your superannuation that you would like to invest for retirement, consider depositing it into your superannuation. In doing so, you will be able to increase your retirement savings and pay less tax on your investment earnings.
Do you earn* less than $51,813 per annum from your job or business?
If your earnings are below this threshold, by making an after-tax superannuation contribution, you may qualify to receive a government top-up of up to $500.
Does your spouse earn* less than $40,000 per annum?
If your spouse's earnings are below this threshold, by making an after-tax contribution to their superannuation account, you will not only increase their retirement savings but you may also qualify to receive a tax offest of up to $540.
* Note that "earn" includes assessable income, reportable fringe benefits and reportable employer super contributions. Other eligibility conditions apply.
However, before you add to your super, there are some Tips and Traps to keep in mind:
Once you have contributed money to super, you won't be able to access it until you meet certain conditions.
There are caps on how much you can contribute to super each year and penalties may apply if you exceed those caps.
Any contributions you want to make this financial year must be received by your fund before June 30. It is important to note that, if you make an electronic transfer (including Bpay), the contribution takes effect the day your super fund receives the funds and not the day you made the transfer.
There are, of course, certain eligibility criteria and conditions you need to meet in order to benefit from these strategies. Contact us and we will help you determine your eligibility and which of the strategies may be appropriate for you.