Super remains a tax-effective means by which to save for retirement. While the percentage at which employers have to pay the superannuation guarantee (SG) is gradually on the rise, at the current 9.5 per cent, many Australians may finish their working lives before they’ve saved enough for the retirement they’d envisaged.
One advantage of Super is that it is a long-term saving mechanism, with the flexibility to make additional contributions to boost your account balance. Depending on your personal and financial circumstances, you may be able to use one of the methods below to contribute more to your super.
Salary sacrifice
Salary sacrifice (also known as concessional contributions) are usually taxed in the fund at a maximum rate of 15 per cent, so by salary sacrificing, you may be able to not only boost your super account balance, but also save on income tax. There are thresholds that apply, and as these amounts include any SG contributions made by an employer, you will have to ensure they are not exceeded. These thresholds are:
- $30,000 cap for anyone aged 49 or under as at 1 July 2015
- $35,000 cap for anyone aged 50 years or over as at 1 July 2015.
Government co-contribution
Depending on your annual income, you may be entitled to make after-tax contributions to your super fund and receive a co-contribution from the Australian Government. If you’re income for the 2015/16 financial year is less than $50,454 and you meet certain other criteria, you could receive a maximum co-contribution of $500. This amount depends on your income and contribution.
Low Income Super Contribution (LISC)
If you earn less than $37,000 and receive or make super contributions, you may be entitled to the LISC. The LISC is a refund of the contributions tax you have paid – the 15 per cent tax paid within your fund – which is paid directly into your super account by the government. This contribution is being phased out, with the last eligible financial year being 2016/17.
After-tax contributions
After-tax contributions (also known as non- concessional contributions) are paid from your take home pay (after tax has been taken out), so the thresholds that apply are much higher than those for concessional contributions. Such contributions are a good way to add a lump sum to your super balance to help you prepare for retirement. The non-concessional cap is currently $180,000 per annum, however, if you are under 65 you can make a contribution of up to $540,000 over a three-year period using the bring-forward rule.
“There are no one-size-fits-all solutions in super, because retirement means something different to everyone,” says Natashya Vikram, a financial planner who works with AustralianSuper members. “But taking the right decisions can make a big difference to your quality of life in retirement, so getting professional advice and information relevant to your personal circumstances is a sensible place to begin.”
Find out how your superbalance can grow by using AustralianSuper’s Contributions Advisor tool.
Natashya Vikram is an Authorised Representative of Industry Fund Services Ltd, (IFS) (ABN 54 007 016 195 AFSL 232514), who provides financial advice to members of AustralianSuper.
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This article has been sponsored by AustralianSuper Pty Ltd ABN 94 006 457 987, AFSL 233788. The views expressed are those of YourLifeChoices and not AustralianSuper. It contains general advice and does not consider your personal objectives, financial situation or needs. Before investing in any financial product you should read the relevant PDS and consider if it is right for you. For more information, please visit australiansuper.com
