Building your super
What is salary sacrifice?
There are some small changes you can make that could potentially improve your super account balance. The important thing is to keep up to date with the latest strategies. This way, you ensure you don’t miss out on any incentives or tax breaks you may be entitled to by investing in your super.
Take advantage of tax breaks
Superannuation Guarantee contributions are generally taxed at up to 15%. Wages or salaries between $37,001 and $87,000 are generally taxed at 34.5% including Medicare Levy. That’s more than double the tax! Income tax is even higher for people earning over $87,000 per year.
Salary sacrifice is a simple strategy1. You ask your employer to invest part of your pre-tax salary or wages into super. The amount you “sacrifice” is taxed at the more favourable contributions tax rate, instead of the higher income tax rate. Effectively, this means less money paid to the Government and more money in your super.
Speak to your HR or Payroll manager to find out if your employer offers this option. Alternatively, click here to find out more.
Spouse contributions are contributions you make out of your after-tax income, on behalf of your spouse. As the contributions are made out of after-tax income, these contributions don’t carry the same potential tax savings that salary sacrifice does. However, if you and your spouse are eligible, you may receive a tax offset of up to $540 as a result of the contribution. Spouse contributions are also a useful way to get more money into super, while staying under the contributions caps, for those who would otherwise exceed the caps. They are also an important part of developing the optimal retirement strategy for a couple, as there are tax and Centrelink implications resulting from the amount of super each spouse has and the order/timing in which they retire.
Click here for more information about spouse contributions or speak to our financial planning service Intrust360° regarding spouse contributions.
Ensure you receive any Government contributions you’re entitled to.
Sometimes it pays to make superannuation contributions from your AFTER-TAX wages or salary. In this instance, you would have already paid income tax on your money, therefore you won’t pay any contributions tax.
Personal after-tax contributions sometimes attract a Government Co-contribution. Eligible people who earn less than the “lower income threshold” of $36,021 receive a 50 cent Government Co-Contribution for every $1.00 of after-tax income they contribute into their super up to a limit of $1000. The rate of Co-Contribution reduces incrementally as the person’s income increases, such that individuals who earn more than the “higher income threshold” of $51,021 receive nothing. Capped at $500, this means that if an individual earning less than the lower income threshold makes an after-tax contribution of $1,000, the Government may contribute up to $500 into that person’s superannuation fund2.
Call us on 132 467 to find out your BPay customer reference to make an after-tax contribution and also to make sure we have your tax file number (TFN) on record.
Take advantage of the Low Income Superannuation Contribution
If you’re a low-income earner, you can also take advantage of the Government’s Low Income Superannuation Contribution (LISC). This contribution applies to any before-tax contributions you make to your super (including superannuation guaranteed contributions from your employer), and can really help boost your super savings, especially if you’re working part-time.
If you earn $37,000 per annum or less and are otherwise eligible, the Government will pay 15% of any before-tax contributions you, or your employer, has made each year directly into your superannuation account, up to a cap of $500. From 1 July 2017, the LISC scheme will be replaced by the Low Income Superannuation Tax Offset (LISTO). The arrangement is the same as the LISC and members who are eligible will continue to receive up to $500 from the Government.
Plug the leakage
When you move from job to job, there’s a risk of having many super fund accounts set up on your behalf. There are two big problems with this. Firstly, you’re likely to be paying admin fees and insurance premiums with each account – unnecessarily. This is a drain on your savings. Secondly, if you accumulate many accounts, it’s easy to lose track of them. And it’s easy for the operators of the super fund(s) to lose track of you as you move house, change jobs etc. When a superannuation account becomes inactive and when a fund loses contact with the owner of the account, sometimes the Australian Taxation Office (ATO) takes control of that account.
The easiest way to avoid these problems is to keep your super consolidated in one account and to ensure your super fund can always contact you. We’ve developed a free find and consolidate service that will get all your super together in one place, search for lost super on your behalf and ensure that we can always contact you, preventing your account from becoming “lost” to the ATO.
Register for our free find and consolidate service. Your very own Super Concierge will bring together all your super accounts, which may save you paperwork and fees. You can register even if you’re not currently an Intrust Super member. Remember to check for fees, charges and insurance changes before closing any account.
The information on this page is correct as at 7 March 2017. For the most up-to-date tax rates, superannuation thresholds and caps, call us or visit www.ato.gov.au. The information on this page is general advice only, is not a recommendation to invest and does not take into account your own personal situation. You should seek advice from a qualified financial adviser to prepare a strategy that suits your particular situation. You should also read any relevant PDS before investing in any superannuation product.
- The salary sacrifice example illustrates the tax paid by an individual earning between $37,001 and $87,000 per year.
- The after-tax contribution example illustrates the Government Co-Contribution for an eligible individual who earns less than $36,021 per year.