What is superannuation?
Superannuation is an investment to provide you with capital to fund your retirement. Depending on the type of fund you invest your money in, there are generally a range of investment options you can choose from. Many of these investment types are similar to those that you can hold in your own name - such as units in a managed fund, or shares for example. The benefit of superannuation is that rate of tax that is paid on your investment earnings is a maximum of 15%, rather than your marginal tax rate which is usually higher.
Contributions to your super account may come from a number of sources, such as from an employer, your own personal savings, or even from a spouse (eligibility criteria applies). For most people who are employees, the most regular source of contributions to super are those from your employer. If you’re self-employed or you aren’t currently working, you may still be eligible to contribute to super. There may even be tax benefits available if you do so.
Keep your super in one super fund
If you’ve moved jobs or done casual work over the years, you might have money in several super funds. Getting all your super in one place is a good starting point.
With one super account, you won’t be doubling up on fees or insurance premiums – which can eat away small balances. With fewer funds to manage, it’ll be easier to keep track of your retirement savings.
Before you consolidate your funds or close any of your existing accounts, it’s important to understand whether you’re losing access to any important benefits - such an insurance policies with superior terms, or one that you may have put in place at a good premium rate, or without any pre-existing conditions.
Try salary sacrificing
You may be able to reduce tax and boost your super balance through salary sacrifice. Salary sacrifice is an agreement with your employer to contribute a certain amount from your pre-tax salary or future bonus entitlements, into super instead of receiving them in cash. Instead of these amounts being taxed at your marginal tax rate, they’re generally taxed at the concessional rate of up to 15%. For example, if you earn $95,000 a year, you could save up to 24c in every dollar sacrificed.
If you’re a high income earner, with total income in 2016/17 more than $300,000, you’ll be taxed an additional 15% on your concessional contributions. Thirty per cent tax would still be lower than your marginal tax rate of 49% (including Medicare Levy and the Budget Repair Levy).
Currently the concessional cap for the 2016/17 financial year is: