Top up your super fund
Why on earth would anyone want to make extra contributions into Super??
The short answer is simple – to build long term superannuation investment and potentially save tax!
Under Government legislation anyone gainfully employed will be receiving 9.5%pa of their salary by way of employer Super Guaranteed Contributions (SGC). It has been legislated that this figure will move to 12%pa at a future point in time.*
Making additional super contributions is one of the simplest opportunities to actively contribute to a retirement savings plan. As of the 1st July 2017 the Australian government introduced changes to how much we can contribute to super under two categories:
- Concessional Contribution (or before tax) – the maximum contribution is $25,000 per annum per individual and includes contributions from SGC, salary sacrifice and personal claimable deductions.
- Non-concessional Contributions (or after tax) – the maximum is $100,000 per annum per individual and includes contributions from after taxed sources including asset sales, lump sums and inheritance. Prior to age 65, a 3 year ‘bring forward’ rule applies where you could make a $300,000 Non-concessional Contribution in year one (but not make another contribution for the following two years).
One of the greatest incentives to actively use your super fund as a long-term investment vehicle is the tax effectiveness. Inside super, the maximum applicable tax rate is capped at 15% vs. potential Individual Tax Rate that could be a up to a maximum of 45%. What this effectively means is if you are on the average Individual Tax Rate of approximately 34% pa for every dollar you contribute (pre-tax) to super versus receive after tax, you would be saving around 19% – a considerable saving!
Even greater, the longer-term incentive of engaging superannuation is the opportunity to be in a 100% Tax FREE environment beyond the age of 60, that tax free status includes not only individual tax rates, but also potential Capital Gains Tax on super assets as well.
When we think about superannuation as an asset, for most Australians, it will be the biggest asset outside of the family home and represents a collective pool of around $2 Trillion!!
