Superannuation isn’t just a great way to save for your retirement. There are a number of ways it can benefit you now.
With the end of 2014 approaching, now is a great time to think about how you can boost your super savings this year and make some smart decisions about your financial future.
To help, we spoke to Mohamed from Avante Financial Services about his top year-end superannuation strategies.
“There are many tax-effective strategies you can implement before the end of financial year,” says Mohamed Said. “These opportunities will be different for everyone, so it’s important to get personal advice about what’s best for you.”
Mohamed’s top five year-end superannuation strategies are:
1. Salary sacrifice
Salary sacrifice means putting some of your before-tax income into your super. Salary sacrifice contributions are classified as concessional contributions and are generally taxed at 15% for most people – which may be much less than your current marginal tax rate.
“Whether salary sacrifice is right for you will depend on your personal circumstances and level of income,”
Mohamed says. “You also need to be careful not to breach the current $30,000 cap on before-tax contributions, which includes any Super Guarantee contributions your employer makes on your behalf.” If you are aged 50 and over, this cap for the 2014/15 tax year is $35,000.
2. Claim a tax deduction on your super contributions
If you are self-employed, retired or unemployed (aged under 65) any personal contributions made before30 June, may be claimable as a tax deduction in your tax return for that financial year. The amount you claim as a tax deduction will generally be taxed at 15% – which may also be much less than your current marginal tax rate.
“This strategy is ideal for people running a business as a sole proprietor or in partnership, as well as some retired or unemployed people,” says Mohamed.
3.Protect your family
“Underinsurance is a major issue in Australia, and this can be frightening for you or your family if you were to get very sick, pass away or become disabled,” says Mohamed.
You may be able to get adequate life insurance cover by purchasing insurance through your super. This involves holding life insurance via your super account and using a portion of your super contributions or account balance to pay for the premiums, rather than paying for the premiums from your after-tax income.
Mohamed says this strategy may also reduce your premiums because the super fund is buying the insurance ‘in bulk’. However, he cautions that this strategy may not be suitable for everyone and recommends seeking personal advice about your insurance needs.
4. Take advantage of Government concessions
“Many people can take advantage of the Government concessions available to increase their super savings, such as the Government co-contribution scheme,” Mohamed says.
If you are a low to middle income earner and eligible for the co-contribution, the Government currently contributes up to $0.50 for each $1 of personal after-tax contributions you make to your super. This could mean up to an extra $500 in your super account.
5. Boost your spouse’s super savings
If you have a low income-earning spouse, you can help top up their retirement savings by contributing to their super – with a tax offset of up to $540 available.
“In certain circumstances, you could also split your employer super contributions or personal deductible contributions with your spouse,” Mohamed says. “And if you split contributions with an older spouse, they can access super before you.”
Act now so you don’t miss out
To find out which year-end super opportunities are best suited to your situation and goals, you should speak to your financial adviser or contact Mohamed Said of Avante Financial Services Pty Ltd on 1300 788 650.
This material is current as at September 2014, but may be subject to change. It has been prepared without taking into account your objectives, personal financial situation or needs. Mohamed Said is an Authorised Representative of AMP Financial Planning Pty Limited ABN 89 051 208 327 Australian Financial Services Licence 232706 and Australian Credit Licence 232706. This information is of a general nature and has been prepared without taking account of your personal needs, financial circumstances or objectives. Before acting on this information you should consider whether the information is appropriate for you having regard to your personal needs, financial circumstances or objectives. Please see your adviser for advice taking into account your individual circumstances. This information is also our interpretation of the law and does not represent tax advice. Before making any financial decision, Avante Financial Services Pty Ltd, AMP Financial Pty Ltd & Mohamed Said recommends you obtain professional financial and taxation advice specific to your circumstances.
