What’s your super contribution strategy for this financial year?
Yes we hear all the time that the rules keep changing with super and why should I trust the government of the day and those of the future not to change them again. It’s easy to get confused in knowing what steps to take to ensure growth and security when it comes to your super. Your super contributions are a very important piece of the puzzle to your retirement strategy!
Regardless of the recent changes, super remains a very tax effective way of saving for your retirement. As we have often said, it’s getting harder to get money into super but it is still an attractive investment vehicle.
And here is why:
Concessional Contributions
Concessional contributions are “before tax” contributions paid into your super and include the employer 9.5% (SG) and any salary sacrifice or personal deductible contributions that you make.
The total amount that can be made is $25,000 including the SG.
Contributions are taxed at 15% on the way into your super fund, rather than you receiving the money and paying your normal marginal tax rate, therefore if you are earning over $18,200 then you may benefit from the tax saving.
Non-Concessional Contribution Caps
Non-Concessional Contributions are those where you have already paid tax and so when they are made into your super fund then they are not taxed on the way in.
The current limit for FY19 is $100,000 per person, if you are under age 65 then you can potentially use the following years cap and bring forward the following 2 years of contribution limits to make a total of $300,000. The table below shows the contribution and bring forward amount available to those under age 65.
| Total Superannuation Balance | Contribution and bring forward available |
| Less than $1.4 million | Access to $300,000 cap (over 3 years) |
| Greater than or equal to:
$1.4 million and less than $1.5 million |
Access to $200,000 cap (over 2 years) |
| Greater than or equal to:
$1.5 million and less than $1.6 million |
Access to $100,000 cap (no bring-forward period, general non-concessional contributions cap applies) |
| Greater than or equal to $1.6 million | Nil |
The total super balance is determined on 30 June of the previous financial year.
Over age 65?
If you are over age 65 then there are more restrictions and you will need to meet the work test of being gainfully employed for at least 40 hours in a period of not more than 30 consecutive days in the financial year.
This requirement does not apply to “Downsizer” or mandated employer SG contributions.
Other types of Contributions
Downsizer contributions as mentioned above are where you can make a contribution of up to $300,000 into super after selling your home that has been your main residence for at least 10 years and you are over 65. A great way of boosting super, but contributions must be made into super within 90 days of settlement of your property. A once off opportunity that should be considered.
There are also Spouse Contributions where you might direct your contributions to your spouse’s account.
Child Super contributions as anyone under the age of 65 can make a contribution into super including minors, and
Government Co-Contributions where if you are a low or middle income earner and make a personal (after tax) contribution to your super fund, the government makes a contributions up to a maximum amount of $500. This strategy is good if you earn less than $37,697 and make a $1,000 contribution, you’ll get $500 from the government. The amount the government will make reduces as your income increases until you hit a total income of $52,697. Your super fund balance must also be under the $1.6mil transfer balance cap.
Tax on the income earned within Super
A huge benefit of saving within super is the concessionally taxed nature.
Earnings are taxed at a maximum of 15%.
Capital gains are taxed at 15% or if you hold the asset for longer than 12 months you get a 1/3 exemption, so the effective tax rate becomes 10%.
Once you have met a condition of release and are in Pension phase then the earnings are tax free within that pension.
Now you can see why we love super; especially for those saving for their retirement. Whilst the rules do change, at JBS it’s our role to keep up with them so that you can enjoy the benefits of your super.
Don’t miss an important piece of the puzzle when it comes to your super strategy. The JBS team are here to guide and support you when it comes to ensuring you have the right strategy in place for your contributions into super this year. If you are thinking about making a non-concessional contribution then talk to us about making it before the election on May 18 just in case the rules change should we get a change in government.
Give the team a call!
By Jenny Brown, April 2019.