- Your current financial strategy
- How to create passive income
- Minimise tax
- Prepare for retirement.
Discover some of the Most Tax-effective Structures Available to Australians with Proactive Superannuation Advice | Book A Free Consultation | Open Monday to Friday 8 am to 5:30 pm | Visit Us At Delta Financial Group Level 11, 22 Market Street Sydney 2000 | Contact us at enquiries@deltafinancial.com.au or 02 9327 4338
Superannuation is your Secret Weapon
Superannuation is one of the most tax-effective structures available to Australians. People have a misconception about super and often think that because the government keeps changing the rules they neglect to take advantage of the best tax structure to create your lifetime income plan.
Understanding The Basics of Superannuation
Superannuation plays a fundamental role in ensuring financial security during retirement. But what exactly is superannuation?
Superannuation, commonly referred to as super, is a long-term savings vehicle that helps individuals accumulate wealth to support their lifestyle after they retire from the workforce.
Most Australians are eligible to contribute to super, and it is compulsory for employers to make regular superannuation contributions on behalf of their employees.
Superannuation is not just a simple savings account; it is a complex system designed to provide individuals with tax benefits and investment growth opportunities to secure their financial future.
Contributions to super are made regularly, either through employer contributions or personal contributions made by individuals. These funds are then invested by superannuation funds to generate returns over time.
Superannuation funds are regulated by the Australian Prudential Regulation Authority (APRA) to ensure the security and integrity of retirement savings. APRA sets strict guidelines and monitors the performance of superannuation funds to protect the best interests of fund members. The Australian Taxation Office (ATO) website plays a crucial role by providing guidelines and ensuring compliance for superannuation funds.
When it comes to retirement planning, superannuation plays a crucial role. It forms the backbone of retirement planning, providing individuals with a reliable income stream to support their lifestyle when they are no longer working full-time.
Relying solely on government-funded pensions may not be sufficient to meet your financial needs during retirement, which is why superannuation is crucial. By planning and contributing to your superannuation fund throughout your working years, you can build a substantial nest egg that will support you during your post-employment years.
Our tailored superannuation advice services are here to help you understand why super matters, how much you may need and how to make the most of it.
Superannuation Video
Maximising Contributions
Contribution strategies can be the turbo-boosters of your super, propelling you closer to your desired retirement lifestyle. A superannuation fund’s bank account must be capable of accepting contributions and receiving contributions from various sources, including employers and personal contributions, to ensure compliance with SuperStream standards and regulations set by the ATO.
Personal deductible contributions
You can usually make your own personal contributions and claim a tax deduction for them to achieve the same tax outcome as salary sacrifice. This is a concessional contribution.
You can make a personal super contribution before 30 June and claim a tax deduction if you:
▪ want to tax-effectively top up employer super and salary sacrifice contributions
▪ terminate employment and receive taxable employment termination payments, or lump sum unused leave entitlements
▪ receive bonuses, or
▪ have taxable investment income and taxable capital gains from the sale of CGT assets.
To be eligible to claim the super contribution as a tax deduction, you need to submit a valid ‘Notice of Intent’ form to your super fund within the required time frames. You will also need to receive an acknowledgement from the super fund before you complete your tax return, start a pension, or withdraw or roll over money from the fund to which you made your personal contribution.
Salary Sacrifice
Salary sacrifice is an agreement between you and your employer to pay some of your pre-tax salary into super. This is often very tax-effective. The amount you contribute to super is taxed at up to 15% (and up to 30% if your income is over $250,000 p.a.) rather than your marginal tax rate, which might be up to 47%. Salary sacrificed amounts to super are considered concessional contributions.
Depending on your circumstances, this strategy could result in a tax saving of up to 32% on the growth of your investments and enable you to increase your super.
Did you know the annual concessional contribution cap is increasing to $30,000 this FY 2024/25 as well as the Superannuation Guarantee contributions rate which is going from 11% to 11.5% of your salary?
Non-concessional contributions (NCCs)
NCC’s are personal contributions to super made from post-tax income or available capital, exempt from contributions tax.
There’s an annual cap for NCCs, currently set at $110,000 for 2023/24, four times the annual concessional contribution (CC) cap.
Individuals under 75 as of 1 July in a financial year can potentially bring forward up to two years of NCCs, allowing for a larger upfront contribution.
Starting 1 July 2024, the annual NCC cap increases to $120,000, with a new three-year bring-forward option rising to $360,000.
Timing is crucial when activating the new NCC bring-forward rule. Many clients have already contributed $110,000 last year and plan to trigger the three-year bring forward this year, potentially adding $360,000 more.
This could mean each parent can inject $470,000 into their super within two months!
Catch-up contributions
If your concessional contributions (CCs) in a given financial year fall below the annual cap, you can carry forward these unused amounts for up to five years. This allows you to potentially contribute more in a future year if you meet the eligibility criteria of a lower starting balance.
The flexibility to make larger contributions when suitable can be beneficial, especially if you experience irregular income or have a significant capital gains tax liability.
To utilise your carried forward CCs via catch-up contributions, your total superannuation balance must be under $500,000 as of the previous 30th of June, and you must have unused CC cap amounts accumulated from the past five financial years.
To learn more about this strategy check out my recent blog https://www.deltafinancialgroup.com.au/catch-up-contributions/
Contribution splitting
Contribution splitting offers the option to redirect a portion of your superannuation into your partner’s account.
A client may choose to divide qualifying concessional contributions from the previous financial year into their spouse’s super account in the subsequent year.
This strategy can assist eligible clients in complimenting their super balances as a couple.
If there is a plan to split personal deductible contributions, the Notice of Intent must be submitted and confirmed by the fund before initiating the contribution splitting process.
Manage Division 293 tax
Division 293 tax is an additional levy on super contributions, decreasing tax benefits for individuals with combined income and concessional contributions exceeding $250,000 for Division 293.
The first-time liability for Div 293 tax may arise in the upcoming financial year due to factors like redundancy, termination payments, or significant capital gains in 2023/24.
Eligibility for catch-up contributions could raise a person’s CC cap, potentially leading to higher Division 293 tax obligations. Nonetheless, individuals subject to Division 293 tax will pay a lower overall tax on their CCs compared to the marginal tax rate on taxable income.
Payment of Division 293 Tax can be made using personal funds or by opting to withdraw it from any existing superannuation accounts.
Super tips for anyone who is 10 years away from retirement
Voluntary Super Contributions
Making voluntary super contributions is a great way to boost your retirement savings and potentially reduce the amount of tax you pay. It can also provide a tax-effective way to transition to retirement.
3 year bring forward Non Concessional contributions
The 3-year bring forward option allows individuals under the age of 75 to make up to three times the annual non-concessional contribution limit of $120,000 in a single financial year, so $360,000 for each person.
Downsizing Contributions
You may be eligible to make a downsizer contribution of up to $300,000 ($600,000 for a couple) if you sell a home that you or your spouse owned for at least 10 years and contribute the proceeds within 90 days of settlement. The minimum age to make a downsizer contribution is now 55, down from 60 (originally 65).
A downsizer contribution allows you to boost your super even if you’re otherwise ineligible to contribute due to age or TSB – meaning you can still contribute even if you’re aged 75 or more or have $1.9 million or more in super.
Superannuation Contribution Splitting
For couples with one spouse who has a higher super balance, it may be beneficial to split some of their contributions into the lower balance account, helping them both qualify for potential benefits and reduce taxes.
Minimising Tax in Retirement
Being tax-savvy in retirement is all about ensuring your sources of income are structured to minimise your tax liability, leaving you with more to enjoy. This is why superannuation is the best tax structure to create your lifetime income plan.
In conclusion, superannuation is a vital component of retirement planning. Understanding the basics of superannuation, exploring different types of superannuation contributions and implementing effective strategies can make a significant difference in maximising your retirement savings.
Contact us for personalised superannuation advice that can transform your retirement dreams into a tangible, prosperous reality. Remember, the most potent wealth is knowledge—so educate yourself, seek guidance, and take charge of your financial future today.
Leading Self-Managed Super Fund (SMSF) Advice
A SMSF offers you greater control, choice and flexibility through a number of features and benefits generally not available with other super arrangements. Understanding the SMSF setup process, including choosing the right SMSF trustee structure, is crucial. Qualified SMSF advice from a professional is your best bet to navigate through the complexities of this option comprehensively and can help you to decide whether it’s right for you personally.
SMSF trustees play a vital role in managing the fund and ensuring compliance with the law. They are responsible for making investment decisions, maintaining records, and preparing financial statements. The different trustee structures available, such as individual or corporate, have significant implications for fund management and should be carefully considered.
SMSFs also offer the benefit of tailoring your investment strategy to suit your personal circumstances. However, it is important to be aware of the responsibilities and time commitment required from SMSF trustees, as well as the unique complaints process that applies to them.
Why choose an SMSF?
More investment control
With an SMSF you can establish your own investment strategy and directly control where and
how your super is invested. You are also granted the flexibility to create an investment strategy that addresses the combined or unique needs of all fund members.
More investment choice
You can select from a wider range of investments with an SMSF including:
- All listed shares.
- Some unlisted shares.
- Residential and business property.
- Collectables such as artwork, stamps and coins.
One fund for the family
If you set up an SMSF for yourself and up to six family members, you could:
- Consolidate your super balances.
- Invest in fund assets of higher value.
- Achieve greater estate planning flexibility.
- Reduce costs.
Borrowing to make larger investments as part of an investment strategy
SMSFs can buy assets such as shares and property by using cash in the fund and borrowing the rest. This can enable the SMSF to acquire assets it currently doesn’t have enough money to purchase outright.
Tax effective
With an SMSF you can:
- Take greater control over the timing of tax events, such as when capital gains and losses on assets are realised.
- Transfer certain assets directly into your fund by making ‘in specie’ contributions, where investment earnings will be concessionally taxed.
- Use your super to start a pension potentially without triggering capital gains tax.
Also, if a member dies or becomes disabled and is below the age of 65, the SMSF may be able to claim the future service element of the benefit as a tax deduction and offset current and future fund tax liabilities.
Greater estate planning certainty and flexibility
You can nominate which of your dependents for superannuation purposes’ you’d like to receive your benefit in the event of your death without having to meet some of the constraints that apply to other super arrangements.
Is an SMSF right for you?
While running an SMSF can give you greater control of your super and retirement savings,
It’s a big commitment. All members are generally required to be fund trustees and vice versa. This means you are responsible for meeting a range of legal and administrative obligations and penalties may apply if you don’t perform your duties. Also, to make running an SMSF a cost-effective exercise, you and your fellow members will typically need upwards of $500,000 in total in your SMSF.
Advice and support
Delta Financial Group is home to a number of leading experts in SMSF advice and management and are prepared to help you:
- Develop and implement an investment strategy for the fund.
- Select investments to match that strategy.
- Determine the right insurance.
- Advise on a tax-effective pension plan.
- Consider your estate planning options.
It is crucial to consult a licensed financial adviser for specialized SMSF guidance to ensure you understand your rights and obligations.
Professional advice is essential in ensuring compliance and making an informed decision regarding investments.
Our SMSF package
Our SMSF advice and management service aligns with the ongoing legal and administration requirements your accountant, solicitor or other professional advisors may recommend when operating your SMSF.
Delta Financial Group may be able to coordinate with third parties on one or more of the following SMSF management services for you:
- Establishment: Setting up an SMSF includes establishing a bank account for the fund to manage cash assets, accept contributions, and pay expenses.
- Corporate Trustee Establishment
- Accounting, tax and audit coordination package
- Strategic advice only package
- Administration package
- Insurance analysis and implementation package
Registered SMSFs can access tax concessions, making compliance with ATO regulations crucial to benefit from these financial advantages.
FAQs
What is the difference between industry and self-managed superannuation funds (SMSFs)?
Industry superannuation funds are managed by professional fund managers and are open to anyone. SMSFs, on the other hand, are self-managed and have a maximum of six members who act as trustees, giving more control but also more responsibility.
How can I maximise my contributions to my superannuation fund?
Strategies include salary sacrificing, making additional contributions, taking advantage of government co-contributions, and utilising spouse contributions. Seeking professional superannuation advice can help you choose the right strategies for your financial situation.
What are the key tax benefits of contributing to a superannuation fund?
Contributions to superannuation funds often receive favourable tax treatment, such as concessional tax rates, tax deductions, and tax-free withdrawals in retirement for certain age groups.
Can I use my superannuation for buying property or investing in businesses?
Yes, under specific circumstances, you can use your superannuation to invest in property or start a business. However, strict regulations apply to ensure compliance. It is best to consult with a superannuation advice professional.
What are the risks associated with self-managed superannuation funds (SMSFs)?
Risks include inadequate diversification, compliance issues, higher administrative responsibilities, and penalties for non-compliance with regulations. Accurate and tailored SMSF advice can help you mitigate these risks.
