Top 5 Ways to Boost Your Super

Tax time is nearly here and the end of the financial year is looming. This is where the line is drawn in the sand as to your financial position as at 30 June. It is no different for your super. Given that it is a low tax environment (15%), it makes sense to take advantage of being able to contribute and have money contributed on your behalf into your super. I thought this would be a great time to let you know about the ways to boost your super both before the end of financial year on 30 June and in future financial years. These rules apply to all super funds including Self-Managed Super Funds.

Concessional Contributions

These are contributions made to your super fund where there has been, or will be, a tax deduction claimed. These include the compulsory contributions your employer makes (super guarantee contributions), salary sacrificing (additional contributions you opt to pay out of your salary), contributions where you are self-employed, and plan to claim a tax deduction, and also personal contributions where you plan to claim a tax deduction. You can contribute $30,000 if you are under 50 and $35,000 if you are over 50. If you are over 65 you need to satisfy the work test i.e. work at least 40 hours over 30 consecutive days for the financial year. The low tax environment of super means you will only be paying 15% on these contributions so it’s a great idea to maximise if you can afford it. These contributions have to be paid into and received by your fund on or before 30 June so ensure you allow enough time for any funds to transfer.

Non Concessional Contributions

These are contributions where tax has already been paid and include personal contributions where a tax deduction has not or will not be claimed, government co-contribution and spouse contributions. The maximum that can be contributed is $180,000 a year and if you are under 65 you can contribute $540,000 in one year but can’t contribute any more in the following two years. This is the general rule and you would have to take into account contributions made in previous financial years. Although tax has already been paid on these contributions, your super fund will only pay 15% on the earnings of these contributions.

Government Co-Contribution

This is money for jam. If you make a non-concessional contribution to your super then the government will contribute half of your contribution up to an amount of $500. It is income tested with the full co-contribution being paid for income earners equal to or less than $34,488 and then goes on a sliding scale (reduces by 3.33 for each dollar above $34,488) up to $49,488. So if you make an after tax contribution of $1,000 and income earned is $34,488, or below, the government will co-contribute $500 to your super fund. So if you can afford it, and you satisfy the income test, consider paying a $1,000 personal contribution into your super and your super will be $1,500 better off.

Low Income Super Contribution

If you earn less than $37,000 you could be eligible for a low income super contribution of up to $500 from the government. It is based on 15% of the concessional contributions that are made to your super. So if $3,000 in concessional contributions are paid into your super, the government will contribute $450 ($3,000 X 15%). The Australian Taxation Office will automatically make these payments into your super fund.

Contribute For Your Spouse

There are two ways that you can do this. The first is to make non-concessional (after tax) super contributions on behalf of your spouse and you can receive a tax deduction up to $540. This is based on being able to claim an 18% tax deduction on contributions up to $3,000. This is only applicable where your spouse has assessable income, reportable fringe benefits amounts and reportable super contributions less than $13,800. This is ideal, for example, where a woman has been a full-time mum and has therefore not had any contributions made to her super for an extended period of time. This will help to boost her super, whilst her partner can claim a tax deduction.

The second way is to split your contribution with your spouse if they are less than 55 or 55 to 64 and not retired. This applies to concessional contributions i.e. contributions where a tax deduction has or will be claimed. You can split up to 85% of these concessional contributions in the year following the year when the contribution was made; 15% remains to pay the tax on the concessional contributions. An advantage of this would be if your spouse is older and will be eligible to access their super benefits sooner; this means it is better that the concessional contributions are given to them and can be accessed sooner. Alternatively, if you are nearing retirement, it may assist with possible Centrelink payments if contributions are split to a younger spouse.

The Australian Tax Office website and ASIC Money Smart website are great places to go to get further advice on all these topics or please feel free to contact me at info@superconfidence.com.au.