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.
Super 101: The Basics
Superannuation may only be one part of your retirement savings, but it’s vitally important. Your super generally consists of contributions from your employer, your own personal contributions and earnings from investments. Throughout your working life you invest into your super. However, your access to your super is generally restricted until you retire after reaching your preservation age – that’s the age you’re eligible to draw upon your super. 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 and Tax
What makes super generally so tax effective are the tax concessions that apply to income generated in super; personal deductible contributions; and employer contributions. There are also tax offsets available to reduce the tax you or your super fund pays. The government may also contribute to your super through a government co-contribution if you’re a low-or middle-income earner. If you make personal (after-tax) contributions to your super fund, the government may contribute up to $500 – depending on your income and how much you contribute.
The good tax news:
- During the ‘accumulation’ phase – that is, the period of investing through super before you retire – the income or earnings in your super are taxed at up to 15%.
- Concessional contributions, including employer contributions and personal
- contributions you claim as a tax deduction, are also taxed at up to 15% (or up to 30% if your income is higher than $250,000 p.a.).
- This rate of tax is generally better than personal tax rates of up to 47% (including Medicare levy). Less tax is deducted, which means you may be able to save more.
Once you retire, you have the choice of taking a lump sum withdrawal, an income stream or a combination of both from your super savings. Our superannuation advice and management services are equipped to help you make the most of the various tax benefits available to you through your super fund.
Contributions to superannuation are split into two key categories.
Concessional contributions include those from your employer, from salary sacrificing, and personal contributions for which a deduction has been claimed. They are generally taxed at up to 15% (or up to 30% if your income is higher than $250,000 p.a.) but there are important limits – called caps – on how much you can contribute. If you exceed this cap, significant tax penalties may apply. Our superannuation advice services are designed to provide you with relevant, timely and accurate information so that you are aware of these caps and are creating wealth, not losing it.
Non-concessional contributions are personal contributions you make into your own super account that aren’t claimed as a tax deduction, and personal contributions made by your partner into your super account, that is, spouse contributions. Our tailored superannuation management service can help you navigate the caps on these contributions and avoid the significant tax penalties that apply if they exceeded.
Key super strategies
Our trusted superannuation management and advice services can design the right combination of specific strategies to help you manage your super more effectively. Here are some general super strategies that you should consider:
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.
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.
Spouse contributions allow you to boost your partner’s super savings. You may be entitled to claim an 18% tax offset on super contributions up to $3,000 made on behalf of your non- working or low-income partner, as long as they haven’t exceeded their non-concessional contributions cap for the financial year or have a high super balance. This is a non-concessional contribution.
Contribution splitting allows you to have some of your super paid into your partner’s account. You can generally split the after-tax amount of your concessional contributions from the prior year (up to your concessional contributions cap). This includes employer and personal deductible contributions, as long as your partner is below preservation age or below 65 and not retired.
Consolidation is the simplest way to boost your super balance. It simply means bringing all your super into one place. Our superannuation advice services can help you weigh up the features and benefits of all of your funds before you make a decision, check the tax implications, compare your fees and replace any lost insurance.
The downsizer superannuation contribution allows older eligible Australians to sell their home and make a contribution of up to $300,000 each to super from the proceeds.
Make sure you review your insurances and nominate your beneficiaries so that, in the event of your death, everything is managed as per your wishes.
Consider these Super Building Tips:
- Read through key super strategies and consult with an appropriate professional superannuation advice service to find out which strategies are suitable for you. There is a lot you can do to make the most of your super.
- Actively manage your super with a financial advisor trained in superannuation management – It makes a difference when compared to passively managing it with a set-and-forget fund.
- Know your number – how much money you’ll need in retirement.
- Understand that retirement isn’t always sudden and may involve a transitional period of part-time work.
- Consider putting a little aside in your super every fortnight.
- Understand the mix of your super investments and think carefully before making any changes.
There are many factors to consider when it comes to managing your superannuation. It may be difficult to anticipate all the risks when choosing the right super-boosting strategies for your specific situation. Consult our professional superannuation advice and management services if you need to.
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. 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.
Why choose an SMSF?
More investment control
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 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 a fund for yourself and up to six family members, you could:
- Consolidate your super balances.
- Invest in assets of higher value.
- Achieve greater estate planning flexibility.
- Reduce costs.
Borrowing to make larger investments
SMSFs can buy assets such as shares and property by using cash in the fund and borrowing the rest. This can enable the fund to acquire assets it currently doesn’t have enough money to purchase outright.
With SMSFs 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 fund 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.
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:
- Corporate Trustee Establishment
- Accounting, tax and audit coordination package
- Strategic advice only package
- Administration package
- Insurance analysis and implementation package
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.