Your superannuation must-knows.
I love doing my end of year tax – said nobody ever! Yet, if you take an eagle-eyed view of your super at this time of year, you could be in for a treat. There are a number of ways you could save on tax.
For instance, if you top up your super, your contribution may be taxed at a lower rate than other investments. Or if you earn under a certain threshold and put in an after tax contribution, the government could reward you with a bonus of up to $500. All savings can be well worth exploring…
To bump up our ‘savings account of the future’ it’s all about what we do now that counts. So check in with your accountant or financial adviser and read these top tips to make sure you don’t miss out.
1. Play matchy-matchy
Who doesn’t like being given money in return for little effort? In a bid to encourage people to give their super the love and attention it deserves, the government offers super co-contributions. If you’re a low or middle income earner, they could pop a co-contribution into your super account of up to $500 – bingo.
To tick the boxes, you’ll need to earn less than $51,813 in the 2017/18 financial year, be under the age of 71, and make a personal (after tax) contribution. The co-contribution amount you receive back depends on how much you contribute and your income – the less you earn, the larger the amount. For instance if you contribute $1000 and your income is under $36, 813 you will receive the maximum amount of $500. Easy.
For more information and the co-contribution calculator, check out the ATO’s super contribution page.
2. Pump up the lump sum
If you earn more than the threshold in Tip 1 above, don’t worry – there’s still room to save and give your super a boost with a one-off voluntary after-tax contribution. For instance, make a payment to your super direct from your bank account with your after-tax income. This is on top of your employer’s compulsory contributions.
Also, the investment earnings on your super are taxed at a maximum rate of 15% (which could be lower than the tax you’ll pay on other investments).
Just don’t forget to keep an eye on how much you’re allowed to contribute. You don’t want to get hit with excess contributions tax (see Tip 6)!
Read more about personal super contributions.
3. Got a significant other?
It may not be the most romantic of dates, but sitting down with your partner and working together on your finances as a partnership is a clever way to save at tax time. Did you know if your wife, husband or partner earns less than $40,000 a year, and you make an after-tax contribution to their super account, you could receive a tax offset of up to $540. Not bad!
The spouse income threshold was recently increased dramatically, so a lot more people are now eligible to claim. Perhaps this now includes the two of you?
4. Give your super a boost
You may be able to save at tax time if you’re willing to give your super a cash injection. If you make after-tax contributions to super after 1 July 2017, you may be able to claim a tax deduction . The tax deduction would be on the money you add to super up to your ‘concessional contributions cap’ (see Tip 6). So, if you’re eligible to claim, contributions tax of 15% will be deducted from the amount claimed. However, if you would like to claim, you need to inform the ATO first. Find out more, including whether you’re eligible, here.
5. Not such a big sacrifice
‘Salary sacrificing’ means you make extra contributions to your super from your before-tax income. It’s an easy set and forget way to really get on top of your super.
The money you add to your super through salary sacrifice is taxed at a concessional rate of 15%. So, you can add more to your retirement savings while potentially paying less tax. If you can squirrel away that little extra into your super fund, you’ll certainly benefit in the long run. The extra you save could make a real difference in the quality of your life when your salary stops, allowing you to do the things you love – such as travel overseas.
However, there are caps on the amount you can contribute to super each financial year at the lower tax rate. Don’t forget to keep an eye on the contributions caps or you may end up having to pay extra tax. See Tip 6 below.
6. Don’t go over the limit!
There are limits on how much you can contribute to your super at a lower tax rate. If you go over your limit you could be stung with extra tax. So, before you make any additional contributions make sure you find out more about the concessional (before tax) and non-concessional (after tax) contribution caps that apply to you. These can vary depending on factors such as the financial year, your age and your income. For example, the concessional cap for 2017-18 and 2018-19 was recently reduced to $25,000 for all ages, and individuals with income exceeding $250,000 p.a. from 1 July 2017 will have an additional tax imposed on concessional contributions. So, double check your contributions are going to be under the new limit.
Remember that your employer superannuation contributions, salary sacrifice amounts and personal contributions where you claim a tax deduction all count towards the concessional (before tax) cap. Make sure you keep up to date with the ATO and your accountant or financial adviser for cap amounts so you don’t ever get caught out!
The information is current as at publication. Any advice on this website does not take into account your objectives, financial situation or needs and you should consider whether it is appropriate for you. Diversa Trustees Limited ABN 49 006 421 638, AFSL 235153, RSE L0000635 is the Trustee of the ING Superannuation Fund ABN 13 355 603 448 (Fund) and the issuer of interests in the Fund. ING Living Super is a product issued out of the Fund. ING, a business name of ING Bank (Australia) Limited ABN 24 000 893 292, AFSL 229823, is the Promoter of the Fund and the issuer of this document. The insurance cover offered by the Fund is provided by MetLife Insurance Limited ABN 75 004 274 882 AFSL 238096. You should consider the Product Disclosure Statement and Financial Services Guide available at ing.com.au and the product’s appropriateness when deciding whether to acquire, or to continue to hold, the product. Before interacting with us via our social media platforms, please take a minute to familiarise yourself with our Social Media User Terms https://www.ing.com.au/pdf/Social_Media_User_Terms.pdf
The information is current as at publication. Any advice on this website does not take into account your objectives, financial situation or needs and you should consider whether it is appropriate for you. Deposit products, savings products, credit card and home loan products are issued by ING, a business name of ING Bank (Australia) Limited ABN 24 000 893 292, AFSL and Australian Credit Licence 229823. ING Living Super (which is part of the ING Superannuation Fund ABN 13 355 603 448) is issued by Diversa Trustees Limited ABN 49 006 421 638, AFSL 235153 RSE L0000635. The insurance cover offered by ING Living Super is provided by Metlife Insurance Limited ABN 75 004 274 882, AFSL 238096. ING Insurance is issued by Auto & General Insurance Company Limited (AGIC) ABN 42 111 586 353 AFSL Licence No 285571 as insurer. It is distributed by Auto & General Services Pty Ltd (AGS) ABN 61 003 617 909 AFSL 241411 and by ING as an Authorised Representative AR 1247634 of AGS. All applications for credit are subject to ING's credit approval criteria, and fees and charges apply. You should consider the relevant Product Disclosure Statement, Terms and Conditions, Fees and Limits Schedule, Financial Services Guide, Key Facts Sheet and Credit Guide available at ing.com.au when deciding whether to acquire, or to continue to hold, a product. Before interacting with us via our social media platforms, please take a minute to familiarise yourself with our Social Media User Terms https://www.ing.com.au/pdf/Social_Media_User_Terms.pdf.