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Tips for growing your Super
Retirement is a time to look forward to, and hopefully a time to relax and enjoy family, friends and your favourite hobbies, without having to worry about money.
To enjoy a comfortable lifestyle in retirement, you need to save during your working life. There are various ways of speeding up your super savings...when you can afford it of course.
Personal or Member Contributions (non-concessional)
You can add extra into your Tasplan super account at any time, it's easy.
Even adding small bits at a time can make a big difference your balance in years to come, with compound interest working wonders if you start early enough.
These contributions are known as 'after-tax' contributions, and are not taxed when they are received by the super fund, nor are they taxed when you withdraw it.
The Government set generous limits on how much you can pay each year, and best of all, you might end up receiving some of the Government co-contributions as well (see below). Further information regarding these limits can be found below.
Making contributions to your Tasplan account is easy. You can:
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Send us a cheque anytime, together with your membership details, or
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Direct Debit an amount each month from a nominated bank account. Print out our Direct Debit Form, fill in the details and post the form to us
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Arrange a payroll deduction with your employer. Our Payroll Deduction Form is provided for this service
If you would like assistance, please call our friendly customer service team on 1800 005 166.
And to see what sort of impact making extra contributions can have on your super, use our Tasplan Super Calculator.
Government Co-contributions
If your annual assessable income is less than $60,342*, you may qualify for the Federal Government's co-contribution scheme, introduced to encourage people to put more money away for retirement.
The Government will pay $1.50 for every $1.00 you pay into your super account in after-tax dollars (subject to limits based on your income). That's a 150% return on your investment - guaranteed !
The Government calls its matching payment a 'co-contribution', and the maximum co-contribution payment available is $1,500 per year.
Take a look at this simple table to see what co-contribution might be available to you:
Co-contribution Schedule for 07/08 Tax year
|
Assessable Income
+ reportable Fringe
Benefits
|
Maximum
Co-contribution
amount available
|
Amount required
to be paid to
get max. available
|
|
$30,342 or less
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$1,500
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$1,000
|
|
$32,342
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$1,400
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$933
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|
$34,342
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$1,300
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$867
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|
$36,342
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$1,200
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$800
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|
$38,342
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$1,100
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$733
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|
$40,342
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$1,000
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$667
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|
$42,342
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$900
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$600
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|
$44,342
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$800
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$533
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$46,342
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$700
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$467
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$48,342
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$600
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$400
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$50,342
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$500
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$333
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$52,342
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$400
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$267
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$54,342
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$300
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$200
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$56,342
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$200
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$133
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$58,342
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$100
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$67
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|
$60,342
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$0
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$0
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A faster way to build your savings for retirement
If you're eligible, this is a great way to top up your super account...after all, when else will the Government give you money for free because you're doing something to help yourself?
All you need to do is decide how you want to pay your contributions (see above), and ensure they are paid to Tasplan before the 30th June each year, and the rest is automatic.
How to take Advantage of Government's Offer. It's Easy!
There's no need to apply. Simply check your eligibility and then make your after-tax payments to Tasplan.
Eligibility
To be eligible to receive the co-contribution you must:
- Make a personal contribution to a complying superannuation fund during the financial year, and
- Have total income of less than $60,342 in the financial year from all income sources, and
- Derive more than 10% of your total income from eligible employment (i.e. not be self-employed), and
- Not hold an eligible temporary resident visa at any time during the year, and
- Lodge an income tax return for the year of income, and
- Be under the age of 71 at the end of the year of income.
The following contributions do not qualify for the Government Co-contribution;
- Superannuation Guarantee contributions
- Salary sacrifice contributions, spouse contributions, child contributions
- 'Self-employed' contributions for which a tax deduction is claimed.
If the Tax Office approves your contributions, it will arrange for the Government's co-contribution to be sent directly to your Tasplan account.
If you would like to know more, simply give us a call on Freecall 1800 005 166.
Salary Sacrifice (concessional)
This is pre-tax method of contributing to super where you agree with your employer to pay money directly into your super account BEFORE you are taxed.
This may be very tax effective, as you end up only paying the Federal Government 15% contributions tax on these amounts, instead of paying tax at your highest marginal tax rate.
For example, if your salary is $40,000 and you decide to salary sacrifice $3,000 to super, your taxable income is now only $37,000.
The $3,000 you previously had taxed at your marginal rate (31.5%) will now only be taxed at 15% when paid to super. That means you end up with more in your super account, and the taxman gets a smaller slice of your hard-earned money.
Unlike the good old days when salary sacrifice was only for the bosses, many employers now offer this option to staff, knowing it's an attractive benefit for staff, so ask your employer if this is available to you.
Also make sure you have this agreement in writing, and be sure to check your existing benefits are maintained. For example, that your employers 9% contribution is based on your original salary.
Salary sacrifice can not only put more in your super account, but also more in your pocket. Look at the following example.
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Scenario 1 |
Scenario 2 |
Scenario 3 |
| |
After-tax contributions
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Salary sacrifice contributions
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Salary sacrifice / after-tax combination
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| Gross salary |
50,000
|
50,000
|
50,000
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| Salary sacrifice contribution |
Nil
|
4,380
|
3,760
|
| Taxable salary |
50,000
|
45,620
|
46,240
|
| Income tax + medicare |
10,350
|
8,970
|
9,166
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| Net salary |
39,650
|
36,650
|
37,074
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| After-tax contribution |
3,000
|
Nil
|
425
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| Money left over for Jim |
36,650
|
36,650
|
36,649
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| Govt Co-contribution |
450
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Nil
|
637
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| Net Amount to Super* |
3,450
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3,723
|
4,258
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In Scenario 1, Jim is making personal contributions of $3,000 a year after-tax – so he’s already paid personal income tax, then contributes $3,000, and winds up with $36,650 for himself. He also qualifies for a Government co-contribution of $450.
In Scenario 2, Jim has decided to change the way he contributes to his super account. He is able to take advantage of the tax savings of salary sacrifice by contributing $4,380 to his super account, yet maintaining the same take-home pay as before. This gives him an extra $273 (net) in his super account.
In Scenario 3, after getting some financial advice, Jim is able to gain even more benefit by combining salary sacrifice AND after-tax contributions to his super account. By making an after-tax contribution of $425, he now qualifies for a co-contribution payment based on his new taxable income. Jim’s take home pay is almost the same as before, but he’s now $808 better off.
As salary sacrifice reduces a person's taxable salary, members considering salary sacrificing should also consider its impact on other benefits such as SG contribution levels and Government benefit payments.
Why not check out the salary sacrifice calculator to see how salary sacrifice might help you?
As always, it's important you to seek financial advice before deciding to change your super arrangements.
As a member of Tasplan, we encourage you to use the free financial advice service available to you, to determine which is the best option for you.
Why not call us on 1800 005 166 for more information about any of the above, or if you would like to make an appointment. Alternatively, you can email us at info@tasplan.com.au.
Contribution Limits
The Government sets limits on the amount a person can contribute into superannuation. For the 2006/2007 year employers are restricted on the amount for which they can claim a tax deduction for concessional contributions. This is called the Maximum Deductible Contribution (MDC) limit. This is based on the employee's age and is as follows:
| Age of Member |
Limit for 2006/07 |
| Under 35 |
$15,260 |
| 35 to 49 |
$42,385 |
| 50 and over |
$105,113 |
For the 2006/07 year, there is a limit of the amount of personal (non-concessional) contributions a member can make. An individual can contribute up to $1 million. Any excess over $1 million will be taxed at 46.5%.
From 1 July 2007, new caps limiting the amount that can be contributed will be as follows:
Employer Contribution Limits (concessional)
| Age of Member |
Contribution Limits |
| Under 35 |
$50,000 |
| 35 to 49 |
$50,000 |
| 50 to 69 |
$100,000 |
| 70 to 74 |
$100,000 |
| 75+ |
No limits, but can only accept mandated (award) contributions |
Member Contribution Limits (non-concessional)
From 1 July 2007, there will be a cap of $150,000 pa on non-concessional contributions. Members under the age of 65 will be able to 'bring forward' 2 years worth of contribution caps and therefore be able to make a contribution in a single year of up to $450,000, and then nothing for the next 2 years.
Those aged 65 to 74 need to satisfy the work test each year and then can contribute up to a maximum of $150,000.
Members over 75 cannot make non-concessional contributions, nor can members who have not provided their super fund with their tax file number.
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