Boosting your super is always a good strategy, but the start of a new financial year is a great time to take stock of your savings.
Super is often the biggest source of retirement savings, with some great strategies you can put in place today to build a brighter financial future.
With a new financial year beginning, it’s a great time to put spare cash to work in your super fund. That’s because your super is taxed at concessional (or lower) rates, leaving you more to play with when you retire. Here are five simple strategies to boost your super:
If your employer offers it, salary sacrifice is a great way to increase your retirement savings.
Salary sacrifice involves putting some of your pre-tax income into super, before you have a chance to miss it. Salary sacrifice contributions are taxed at the concessional rate of 15 per cent (or up to 30 per cent if you earn more than $300,000), rather than your marginal rate.
Just make sure you stay within your contribution limits. Concessional contributions are capped at $30,000 in the 2015-16 financial year, or $35,000 if you are aged 50 or over. This includes Super Guarantee payments already being paid by your employer as well as any salary sacrifice contributions.
And the savings don’t stop there. Once your money is in super, investment earnings are also taxed at 15 per cent. If you held the same investments outside super they are taxed at your marginal rate, which could be as much as 49 per cent!
Make a tax-deductible contribution
If salary sacrifice isn’t an option, you haven’t been forgotten.
If you are self-employed, retired or not in the paid workforce and are eligible to contribute to super, you can make a personal super contribution and claim it as a tax deduction. The amount you claim as a tax deduction will generally be taxed at 15 per cent, which may be less than your marginal tax rate.
Protect your family
Do you ever wonder how your family would cope financially if you were to get seriously ill, pass away or become disabled?
One pre-emptive step could be to take out life insurance through your super. This involves making premium payments from your super contributions or account balance, rather than your after-tax income.
The upshot is that you’re left with more money in your pocket, but still have peace of mind knowing that your family is covered in case of the unexpected. Another advantage is that your premiums may be lower because your super fund can offer a group discount.
The downside is that your super account balance is smaller. For this and other reasons why this strategy won’t suit everyone, consider seeking professional financial advice about your insurance needs.
Take advantage of government contributions
Are you a lower income earner or student? Or perhaps you only worked for part of a financial year?
If you earn less than $50,454 in a financial year and make an after-tax contribution to super, then you may be entitled to a government co-contribution of up to $500.
Give your spouse a super lift
If your better half earns a low income or has taken time out of the workforce to care for children, you can top up their retirement savings by contributing to their super. As an added incentive, you may receive a tax offset of up to $540.
You may also be able to split your employer’s super contributions or your own personal tax-deductible contributions with your spouse. If your partner is older than you, they will be able to access their super before you can. This can give both of you more financial flexibility in the years leading up to your retirement.
Small business owners often struggle to find extra cash for super. That’s all the more reason to take advantage of other tax concessions on offer, including an immediate deduction for the cost of business assets up to $20,000, compared with the previous threshold of $1,000.
With so many great opportunities to grow your super savings, use these tips to start your tax planning for the new financial year today. Your financial adviser can also help you decide which strategy is best suited to your personal circumstance and life goals.