(03) 9020 2905It’s hard to get your super to soar like an eagle when it’s regulated by a bunch of turkeys.
And whether the gobblers pulling the strings in Canberra are politicians or public servants matters little. Super will be a lot less so from next month.
Forget the recent market gyrations and their impact on your super. If you’re 30, 40 or 50, another 10 per cent fall doesn’t matter. You can’t touch your super for one, two or three decades.
There’s a far more important matter to worry about. How do I get enough money in to super?
From July 1, it will be the harder to get money into super tax-effectively than at any time since compulsory superannuation began in 1992. Super, as a way to pro-actively save for retirement, is being cut off at the knees.
Remember the Black Knight in Monty Python and The Holy Grail? No arms. No legs. And still fighting. “It’s just a flesh wound!”
And that’s ignoring super’s catastrophic returns. The average five-year return, after fees, is now a poofteenth above zero.
Today, I’ll save you having to read legislative updates, fund manager sales pitches and the turgid rubbish your super fund sends you.
With a month of this financial year to go, here’s how you help build your pot of super gold.
Government co-contribution
If you earn less than $31,920 and you’ve got a spare $1000 to put into super, you’ll get a 100 per cent guaranteed return. The Government co-contribution will match you dollar for dollar up to $1000.
If you earn more than $31,920, but less than $61,920, they’ll match you on a sliding scale. That is, if you earn half way between those two figures (or $46,920), then you’ll get a maximum of $500.
From July 1, the maximum co-contribution falls from $1000 to $500. And it will also cut out at just $46,920.
Lower concessional contribution caps
A broken super promise to half-centurians is a big kick in the goolies. The over-50s, with lower super balances, were supposed to be able to continue to put in a higher amount to super. The government reneged on that deal at the budget.
As a result, if you are over 50 now, you have four weeks to put in up to $50,000 at a concessional tax rate. (Be careful, the calculations include the 9 per cent from your employer. If you’re not sure, speak to a financial adviser or your pay office immediately.) For employees, this means salary sacrifice. For the self-employed, you can make a deductible contribution in one hit. But it needs to be before June 30.
From July 1, everyone will have the same concessional contribution limit of $25,000.
Salary sacrifice
It used to be that when you hit 50, with the mortgage paid down the kids almost ready to be kicked out, that you would load up your super.
Generation Xers (1960-1980) simply won’t be able to do that. The contribution limits are too low. From the age of 40, you need to start putting more into super.
For most people, that means salary sacrifice. If you have some spare cash to get you through to June 30, see your pay office immediately and see if you can sacrifice some/all of your salary before June 30. Even a few thousand dollars. Set up a plan to do more from July 1.
No tears shed here
The 1 per cent that earns more than $300,000 a year should load up on super this year also. Contributions they make from July 1 will be taxed at 30 per cent rather than 15 per cent. Understandably, there were few tears shed for this minority on budget night.
A rare bonus
On a positive note … low-income earners will get a super bonus from July 1. Those earning less than $37,000 will get up to $500 tax repaid into their super fund, which equates to the tax paid on their employer contributions. Unfortunately, apart from bringing forward income from next year to this year, there’s not much planning you can do for that.
When people think of the end of financial year, it’s usually about buying stuff to save on tax. Isn’t that just a little bit backward? How about something a little positive – saving tax by paying less of it and investing in your super?
End of year super tips
- If you’re earning less than $46,920, consider a $1000 after tax contribution to get the government co-contribution.
- Consider salary sacrificing some or all of your last month’s pay. Contact your pay office.
- The over-50s should make the most of their last chance to make up to $50,000 of concessional contributions.
- Those earning over $300,000 a year will pay double the super tax from next. Contribute as much as possible this year.
Bruce Brammall is the author of Debt Man Walking (www.debtman.com.au) and a licensed financial adviser. bruce@debtman.com.au.