SUPERANNUATION can be a source of joy, frustration or boredom — depending on your stage of life. Despite constant government tinkering, super’s tax benefits still make it the best way to save for retirement. Here are six super checks that are worth considering for the new financial year.
- A NAUGHTY OR NICE BOSS?
Employers must make their compulsory payments to your super within 28 days of the end of each quarter or risk severe penalties, but companies that are strapped for cash sometimes don’t pay.
Your employer’s super contributions should be reported on your pay slip. Check that it’s also arriving at your fund. “Most large super funds will give you an option of checking online, or you can wait for the statement to come through the mail every six months,” says Colonial first state head of technical services Craig Day.
The Australian Taxation Office can help people chase missing employer superannuation payments.
- MAKE IT PERSONAL
If you are your own boss, you can pay money into your super personally and claim a tax deduction to lower your taxable income.
“Personal deductible contributions are quite valuable to a lot of people,” Day says.
“To be eligible you generally need to be self-employed or derive most of your income from your investments.” It’s a popular strategy among business owners who have had a good year, while retired or semiretired people often do it too.
- CHECK YOUR CAPS
Tax-deductible payments to super, whether from self-employed people or through salary sacrifice, have limits. These contribution caps are currently $30,000 for people aged under 49 and $35,000 for those aged 49 and over.
“If you contribute more than those caps, the excess amount will be added to your assessable income and taxed at your marginal rate,” Day says.
SMSF Association director Graeme Colley says don’t forget that employer’s compulsory super payments count towards your cap.
Low income earners who put $1000 after-tax into their super may be eligible to $500 free from the government.
- FREE MONEY
People earning below $49,488 this financial year can receive up to $500 free from the Federal Government if they make a $1000 after-tax contribution to their super.
The government’s co-contribution scheme isn’t as generous as it once was but can still pack a punch, particularly when mums, dads and grandparents help out. Teenage workers can benefit from huge compound interest gains over many decades if $1500 extra lands in their super early on.
“Payment of the co-contribution is automatic as the ATO pays the amount to your superannuation fund,” Colley says.
- TAX OFFSETS
“Spouse contributions can be an important addition to a spouse’s superannuation savings,” Colley says.
If a spouse earns less than $13,800 a year, their partner can get a $540 tax offset by paying $3000 into the spouse’s super fund, he says. “These contributions are not tax-deductible.”
- SUPER TOP-UP
Salary sacrifice is a strategy best used from the start of a financial year to lower your tax payable, but people with a willing employer may be able to use it for a late boost. “Maybe you can salary sacrifice the next week or two’s salary – talk to your employer,” Colley says.