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Why should I put money into Super?
Super is simply the name for money that is preserved until a certain requirement is met (for example retirement or age). If you put money into super, you will have more to live on in retirement. Think of it as savings.
It can also be taxed at a lower tax rate than you usually pay on your non super money. So, in a nutshell, the key things that make super different are access and rates of taxation.
So what kind of contributions can you make and how is it taxed?
Super Guarantee Payments
These are the payments made by your employer and the current minimum is 9.5% of your salary. Don’t think about this as your employer’s money-this is your money!
It is also known as a concessional contribution and is taxed at 15%.
This is where you arrange with your employer to pay some of your before-tax salary into your super fund.
Income tax doesn’t apply to salary sacrifice contributions within the contribution limits – they are instead taxed at just 15%. Marginal tax rates can be as high as 49%, so salary sacrificing can reduce the overall rate of tax that you pay. This is also a concessional contribution.
After Tax Contributions
These come from sources that have already been taxed – for instance, savings or the sale of an asset. Under certain limits, no additional tax is payable on these contributions. This type of contribution is a non-concessional contribution.
Take advantage of the Government’s co-contribution scheme
If you choose to make after-tax contributions and earn less than $50,454 during the 2015-16 financial year, the Government could boost your super balance by up to $500.
Get a Spouse Contributions Tax Offset if your spouse is a low income earner
If you have a spouse who is eligible, you could get a tax offset if you make a super contribution on their behalf. Your contribution up to a limit of $3,000 could give you a tax offset of up to $540.
Caps apply to both concessional and non-concessional contributions as well as rules depending on your age and work status.
Super funds are not required to aggregate the total of member contributions received for a person either within the fund or across other funds.
This can be complex and if you get it wrong, penalties can apply.
It can help to talk to a financial adviser, who can guide you through all the ways you can make your super work harder for you. Call Katherine Hann on 08 8299 9927 for a no obligation discussion today.