So, it’s almost tax time. Yes, that wonderful part of the year when our minds turn to all things financial. Let’s look at this as an opportunity…
Why? Because, giving a damn about the state of your super now can pay off big time later. So let’s go through what you can do to make your future way more rewarding.
Remember: your super is not some random thing in the far-distant future. It’s money. Your money. And we have several ways, which you may not know about, to give it a very welcome boost.
1. Play matchy-matchy with the Government.
If you’ll earn less than $50,454 in the 2015/16 financial year, check out the Australian Government’s super co-contribution. Just make an after-tax contribution to your super, and if you’re eligible the Government will put in 50 cents for every dollar you contribute, up to $500 this financial year
2. Pump up the lump sum.
So you earn more than the above-mentioned threshold? Adding voluntarily to your super now can still make sense. That’s because the investment earnings on your super are taxed at a maximum rate of 15% (which can be lower than the tax you’ll pay on other investments). Don’t forget to keep an eye on how much you’re allowed to contribute. You don’t want to get hit with excess contributions tax!
3. Indulge in some super-related pillow talk.
OK, here’s a good one. Did you know if your wife or husband earns less than $13,800 a year, and you contribute to their super account, if eligible you could receive a tax offset of up to $540? Again, knowing these little ins-and-outs can really add up.
4. Self-employed? You can save even more.
If less than 10% of your taxable income is earned from an employer, you may be able to claim a tax deduction for after-tax contributions you make to super. So you can get a tax deduction on the money you add to super up to your ‘concessional contributions cap’. Which means if you’re eligible to claim, contributions tax of 15% will be deducted from the amount claimed.
If you were under 49 on 30 June 2015, this amount is $30,000. If over 49, it’s $35,000. Self-employed contributions are another smart way to get ahead.
5. Not such a big sacrifice.
‘Salary sacrificing’ to super means you make extra contributions to your super from your before-tax income. Money you add to your super through salary sacrifice is taxed at a concessional rate of 15%, so you could add more to your retirement savings while potentially paying less tax. If you can squirrel away that little extra into your super fund, you’ll certainly benefit in the long run. Don’t forget to keep an eye on your contributions caps to avoid any unnecessary excess contributions tax. Remember that your employer superannuation guarantee amounts and salary sacrifice amounts amount both count towards the concessional cap.
6. Beware of going over the limit!
Don’t forget, there are limits on how much you can contribute to your super. If you go over your limit you could be stung with extra tax. So, before you make any additional contributions make sure you find out more about the concessional and non-concessional contribution caps that apply to you. As well as the current contribution caps, the government has proposed in the 2016 Federal Budget to introduce a non-concessional lifetime cap of $500,000. Whilst not yet legislated, you’ll need to bear in mind that if it is passed in its current form it will be effective from 3 May 2016.
See? Remaining positive and proactive in the lead up to tax time – and actually giving a damn – can get you closer to your financial goals.
ING DIRECT Living Super provides an award-winning flexible online solution which helps you manage your super throughout all stages of your life. Find out more.