How can I contribute to my super?
Unless you’ve been living under a rock, you would be familiar with the term ‘superannuation’.
But what is it exactly?
Even if your retirement is a decade or two away, it’s important to start thinking about it now.
In our experience, we see many clients who simply don’t understand their super and how to maximise it to their benefit. They know their boss is sending some money over to it every pay cycle, but that’s pretty much the extent of it.
As advisors, one of our jobs is to educate our clients about their super and ensure it’s working in their favour. So, let’s dive in and decipher it.
What is superannuation?
Superannuation refers to the special fund either you or your employer contribute to during your working life. This fund holds the money you’ll live on when you retire.
In Australia, there are two age rules when it comes to retiring and accessing this super fund:
- Preservation age: This refers to the age you can access your super funds – as long as you’ve also met a condition of release (such as retiring or turning 65).
- Age Pension age: This refers to the age you can access Australia’s Age Pension, provided that you’re an Australian resident and you pass both the income test and the assets test.
Your superannuation is a tax structure – and has some great tax benefits. Awesome!
How can I contribute to my super?
1. Concessional contributions
Concessional contributions are payments made before tax.
- Superannuation Guarantee (SG) – This is the compulsory 9.5% superannuation contribution employers must pay into their employees’ super funds.
- Salary sacrificing – Also known as salary packaging or total remuneration packaging, this is an arrangement between an employer and an employee where the employee agrees to forgo part of their future entitlement to salary or wages.
- Personal contributions – In this scenario, you’re contributing additional funds from your after-tax income (aka your take-home pay) that you wish to claim a tax deduction for.
The tax on concessional contributions is 15%. So if your tax rate is greater than 15%, it may be advantageous for you to go down this path.
2. Non-concessional contributions
Non-concessional contributions are generally personal contributions which are made after you have paid tax on it.
This could include:
- Inheritances – Rather than paying off your mortgage or going on a holiday, you might choose to reinvest the inherited sum into your superannuation.
- Surplus savings – If you’ve got excess cash in your bank account, you can move it over to your super for safe-keeping and enjoying your golden years.
Is there a limit on super contributions?
Yes, there is.
- Concessional – The cap is $25,000 per person per annum.
- Non-concessional – $100,000 per person per financial year.
Up to the age of 65, you can bring forward three years into one contribution.
If you are over 65, you’ll need to meet the work test first. Then the maximum is $100,000 per financial year.
Superannuation is there for an enjoyable and stress-free retirement.
With a well-structured plan, you can retire on that sandy beach with a cocktail (or two) without a care in the world.
If you need any help, feel free to reach out to a financial advisor at Creo Wealth. We’ll help you set up your superannuation contributions to ensure you’re building a secure future.
This is general information and does not consider your circumstances. Before acting on such information, you should consider the appropriateness of the information having regard to your personal objectives, financial situation or needs.
Creo Wealth Pty Ltd ABN 96 605 894 415 is a Corporate Authorised Representative (No. 1236172) of ClearView Financial Advice Pty Limited ABN 89 133 593 012 AFS Licence No. 331367 GPO Box 4232, Sydney NSW 2001
This blog is part of the Creo Wealth Superannuation 4 Part Series.
Stay tuned for the next blog on Understanding your super statement and what you are invested in.