Make Your Super Contributions Before the End of Financial Year | April 1, 2016
With the EOFY fast approaching, we always remind our clients to make their super contributions pre-June 30 to take advantage of the potential benefits available for the financial year. However, with the average female super balance at the time of retirement around half that of their male counterparts, we think it is vitally important for women of all professions and life-stages to consider their super contribution options come June 30 this year.
The Association of Superannuation Funds of Australia (ASFA) estimates that around 90% of women will retire with inadequate savings to fund a comfortable lifestyle in retirement – and one in three will retire with retire with no superannuation at all – with greater time out of the paid workforce to raise children and the gender pay gap remain some of the main contributing factors.
There are a few simple strategies that could help you narrow the superannuation gap and boost retirement savings to make a real difference to your financial freedom in retirement. Let’s take a look.
Contribute to your super
“Check your eligibility to sacrifice your pre-tax salary and bonuses straight into super which could reduce the tax on your salary and help you take advantage of your contribution caps.”
Contributing pre-tax salary to your super account is a great way to save on tax, boost your superannuation and help narrow that super gap at retirement age. Several months ago we went into greater detail about Salary Sacrifice on our blog, so check out our post here for more information on how it works and contribution caps. http://compfinancial.wpengine.com/salary-sacrifice-more-super-less-tax/
“If you or your spouse earn less than $13,800 per year, you could be eligible for a tax offset of up to $540 by making a contribution on their behalf.”
If you decide to work part time or take a break from work completely, your spouse can make a contribution to your super during this time. If your income is $13,800 or less, your partner (married or de facto) can contribute up to $3,000 into your super and at the same time receive an 18 per cent tax rebate (of up to $540).
Considerations for you?
You must both be Australian residents, living together permanently at the time of the contribution, and as you might expect, your partner can’t also claim a tax deduction for the same contributions.
“Superannuation contribution splitting means that your spouse can split some superannuation contributions made in the previous financial year to your superannuation account.”
Super splitting is a way for you or your spouse to accumulate superannuation, even if you have a low income or are not working. Up to 85% of concessional superannuation contributions (e.g. superannuation guarantee contributions, salary sacrifice and contributions made for which you have claimed a tax deduction), made during one financial year can be split between you and your partner the following financial year. The standard annual concessional contributions cap is $30,000 for those under age 49 on June 30 of the tax year prior, and $35,000 for those aged 49 years or older on 30 June of the tax year prior to the one the contribution is made.
Your partner could still split to you even if you are still working part time and making some contributions. Your partner makes the normal super contributions during the year and has until 30 June of the following year to transfer a contribution across to you – so you can still do the split for the 2014-15 tax year.
Considerations for you?
- You can split super contributions if you are married, or in a de facto relationship, as long as your partner is under preservation age, or between preservation age and 65 and not yet retired.
- Existing account balances and non-concessional contributions cannot be split.
- You also are not able to split more than the concessional contribution cap.
- The amount split will not count towards the receiving spouse’s contribution caps.
“For the 2015/2016 financial year, if you meet all the requirements and make a personal contribution (using your after-tax money) of at least $1,000 into superannuation, the Government will contribute an additional $500.”
Many women taking a break, whether it be having or raising children, will find they’re a low-income earner during that period. If so, they may be eligible to contribute up to $1,000 into super and have the government tip in 50 cents for every $1 they contribute – up to $500 in total. That’s a 50% return on your money.
It’s something to consider if your total income is less than $50,454 for the 2015-16 financial year. There are a few other criteria you must meet, so head to the ATO website to see the eligibility criteria (https://www.ato.gov.au/individuals/super/in-detail/growing/super-co-contribution/).
The best news is that all of these strategies are simple to implement. Your super fund should be able to provide more information and the ATO website is also a great source of information on eligibility requirements and processes. Everyone’s situation is different, and this article provides general advice that doesn’t take into account your personal financial circumstances, so you should always speak with your financial advisor before making any decisions.
This article is for general information purposes only. It has been prepared without considering your objectives, financial situation or needs. You should, before acting on the information, consider its appropriateness to your circumstances.
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