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Maximise your super contributions

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With the end of financial year (EOFY) only a couple of weeks away, now is the time to review your super and make any last contributions before the EOFY. Regular contributions may have been made to your super fund throughout the year via your employer Superannuation Guarantee payments, and you may have even salary scarified some of your wage into your super. But what other strategies could you be implementing before the EOFY to get the most out of your super?

To maximise the opportunities available to boost your super and potentially reduce your income tax liability, you do need to be aware of the different types of contributions you can make and the limits on how much you can contribute into your super each year. We have summarised some strategies below that maybe suitable for you.

Salary Sacrifice

Salary sacrificing is a pre-tax contribution from your income to your super fund. Your nominated amount comes out of your salary before you are paid which reduces your taxable income, and potentially reduces the amount of income tax paid each year. You can arrange with your employer to salary sacrifice on your behalf, your employer will process the contributions into your super fund as part of their payroll administration. Generally, you don’t have to do anything accept monitor your super fund to ensure the contributions are being paid as arranged.

It is important to note that there is a cap on concessional (pre-tax) contributions into your super. The cap is $25,000 per year and includes your employer (SG) contributions, salary sacrifice and any personal contributions that you claim a tax deduction on.

Personal Contributions

You can also make personal contributions to your superannuation.

Non-concessional contributions are paid into your super from your after-tax pay. These personal contributions, that you do not claim a tax deduction on, are subject to a cap of $100,000 per financial year, or, utilising the ‘bring-forward’ rule, up to $300,000 over a rolling three-year period if you are aged under 65 any time during the financial year you make the contribution. Utilising the bring-forward rule can be complex and we recommend you seek financial advice before doing so. Instructions on how to make these contributions can be provided by your super fund.

Personal concessional contributions allow you to claim a tax deduction on the contributions, however be aware that they will be included in your concessional $25,000 cap.

Government Co-contributions

If you earn less than $53,564 (before tax) within the 2019/20 financial year and make after-tax super contributions then the government may contribute up to a maximum of $500 to your superannuation account in a year. The government will determine how much you are entitled to once you have lodged  your tax return. For more information see Super co- contribution on the ATO website.

Spouse contributions

If you or your spouse (married, de-facto or same sex) have taken time out of their career, for example to stay at home with children, it may be effective to make super contributions into their super fund. This may have the benefit of increasing their retirement savings and optimise some tax benefits. You can make a spouse contribution using two methods; the first is to make a non-concessional contribution directly into their account, or through contribution splitting whereby you split your concessional (before tax) contributions with your spouse

Contribution splitting is when you transfer or roll over a portion of your super contributions from your account to your spouse’s account. Splitting your contributions with your spouse does not reduce the amount counted towards your concessional contributions cap.

For more information see contributions splitting on the ATO website or contact your Financial Adviser.

Downsizing contributions

If you sell your home after owning it for more than 10 years then you may be able to contribute up to $300,000 from the sale into your super. You must be 65 years old or above, and meet the eligibility requirements. See Downsizing contributions into superannuation on the ATO website.

Summary

You should make the time to regularly review your superannuation to ensure you are on track to achieving your retirement goals, whether you plan on retiring in 5 years or 50 years. Utilising these strategies can provide a significant boost to your eventual retirement savings, and there is no time too soon to commence using them, the earlier the better!

If you would like advice on which strategies might be appropriate for you and how to implement them, please do not hesitate to contact us.

General advice warning: The advice provided is general advice only as, in preparing it we did not take into account your investment objectives, financial situation or particular needs. Before making an investment decision on the basis of this advice, you should consider how appropriate the advice is to your particular investment needs, and objectives. You should also consider the relevant Product Disclosure Statement before making any decision relating to a financial product.

Jessica Robinson

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