Looking for some smart super ideas in 2021?
Whatever your longer term plan is about your Super, have a shorter term plan about understanding its potential.
With the end of the financial year's June 30th fast approaching, it might be time to start thinking about your super for another year. Here are five smart strategies that could benefit you now, and help boost your super balance for later.
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Let's be frank - everyone has a different attitude to their superannuation
We understand not everyone is savings for a house, paying a mortgage or thinking about doing that sometime soon.
- So, for some people, saving in their superannuation may be a key part of their preparing for retirement strategy so keeping track of the changing super contribution laws is important.
Tax advantages of Saving In Your Super
Saving more in super can come with tax and other benefits this financial year – but that’s just the start.
What's the Big Deal about Super?
It can be very useful, depending upon your plans now and for later - and your timeline towards retirement.
- Once the money is invested in super, any earnings are taxed at a maximum rate of 15% – instead of your personal marginal tax rate, which may be up to 47% 2.
- This low tax rate can help you build up savings for your retirement.
- When you do retire, you can also transfer your super into a ‘retirement phase’ pension 3. Once a fund is in the retirement phase, won’t pay tax on investment earnings, (and that's very cool) and any income payments you receive from age 60 onwards are tax-free.
Five Smart Strategies for your Super
Here are five strategies that could benefit you now, and help boost your super balance for later.
Strategy 1: Add to your super and get a tax deduction
This may be right for you if:
Are employed, self-employed or earn taxable income from other sources (such as investments)?
How to use this strategy
Make an after-tax super contribution and claim a tax deduction
The benefits may include:
- Pay less tax on your income
- Increase your retirement savings
Strategy 2: Get more from your salary or company bonus
This may be right for you if:
You're an employee
How to use this strategy:
Arrange for your employer to contribute some of your pre-tax salary or a bonus into super, as part of a salary sacrifice agreement
The benefits may include
- Pay less tax on your income
- Increase your retirement savings
Strategy 3: Convert your savings into super savings
This may be right for you if:
You have money outside your super that you’d like to invest for retirement
How to use this strategy
Make an after-tax super contribution and move some of your general savings from outside super - into super.
The benefits may include
- Pay less tax on your interest income
- Increase your retirement savings
Strategy 4: Get a super top-up from the Government
This may be right for you if:
You earn1 less than $54,838 pa from your job or business.
How to use this strategy:
Make an after-tax super contribution
If your spouse is not working or earns a low income, you may want to consider making an after-tax contribution into their super account. This strategy could potentially benefit you both: your spouse’s super account gets a boost and you may qualify for a tax offset of up to $540.
The benefits may include
- Receive a Government co-contribution of up to $540
- Increase your spouse's retirement savings
Strategy 5: Boost your spouse’s super and reduce your tax
This may be right for you if:
You have a spouse who earns1 less than $40,000 pa
How to use this strategy:
Make an after-tax contribution into your spouse’s super account
The benefits may include
- Receive a tax offset of up to $540
- Increase your spouse’s retirement savings
Super tips and traps
Make sure any contributions you want to make this financial year are received by your fund before June 30.
It is very important to know that there are caps on how much you can contribute to super each year. It’s important to take the caps into account, as penalties may apply if you exceed them.
Pro Tip: Before you add to your super, keep in mind you won’t be able to simply access the money until you meet certain conditions.
Pro Tip: With electronic transfers (including Bpay), the contribution takes effect the day your super fund receives the money, not the day you make the transfer.
Other eligibility criteria and conditions apply in relation to these strategies. Further information can be found on the Australian Taxation Office website ATO website
Get smart and get super advice
You’ll need to meet certain conditions before you can benefit from any of these strategies.
Let's have a chat to assess your eligibility for using these strategies, explain the different options available to you in detail and help you decide which strategies are appropriate for you.
Call us today on 1300 137 403 or email us here for a no-obligation private chat about your situation.
Drew Browne is a specialty Financial Risk Advisor working with Small Business Owners & their Families, Dual Income Professional Couples, and diverse families. He's an award-winning writer, speaker, financial adviser and business strategy mentor. His business Sapience Financial Group is committed to using business solutions for good in the community. In 2015 he was certified as a B Corp., and in 2017 was recognised in the inaugural Australian National Businesses of Tomorrow Awards. Today he advises Small Business Owners and their families, on how to protect themselves, from their businesses. He writes for successful Small Business Owners and Industry publications. You can read his Modern Small Business Leadership Blog here. You can connect with him on LinkedIn. Any information provided is general advice only and we have not considered your personal circumstances. Before making any decision on the basis of this advice you should consider if the advice is appropriate for you based on your particular circumstance.
Footnotes:
1 Includes assessable income, reportable fringe benefits and reportable employer super contributions. Other eligibility conditions apply.
2 Includes Medicare levy.
3 There is a limit on the total amount that can be transferred to the retirement phase in a person’s lifetime. This limit is $1.6 million in FY 2020/21 (subject to indexation) and increases to $1.7 million in FY 2021/22.
