Add Some Sparkle to your Retirement Savings before 30th June 2024
Making super contributions is one of the simplest ways to improve your final retirement balance and reduce your tax bill.
The maximum concessional contributions cap, currently $27,500, is important as this is taxed at 15% compared to your marginal tax rate and forms part of your employee super. The Superannuation Guarantee (SG) contributions are compulsory contributions made by your employer into your super fund on your behalf as part of your total salary package. The 2023/24 Financial year SG rate is set at 11.0% and increases next Financial year to 11.5%.
There are two key strategies for making the most of generous tax concessions when saving for retirement.
An example of a contribution strategy is a person on a taxable salary of $85,000 plus super will have employee super contributions representing $9,350 per annum or 11.0%. To top up your super to the maximum cap you can make a Personal Contribution of up to $18,150.
This extra contribution is required to be made before the end of the financial year. Most super funds have a cut-off date of 1st June to action this to enable time for processing and allocations.
You are required to submit a Notice of Intent form for the contribution to your super fund to claim the Personal tax deduction.
A salary sacrifice strategy is when your employer makes pre-tax super contributions on your behalf from your gross salary directly to your super fund. If you are in a tax bracket above 15% this will be a worthwhile strategy.
People who have not used their annual caps can carry these forward for five years. These are known as catch-up contributions. To be eligible, your total super balance (TSB) must be below $500,000 as of 30 June the previous year.
The Benefits of making a further contribution to super via salary sacrifice, personal contributions or catch-up concessional contributions are.
- Reduce your taxable income and save tax via a salary sacrifice to super arrangement.
- Receive a tax deduction of 15% on your personal taxable income for personal concessional super contributions.
- Grow your super for retirement.
- Invest your funds for the long term.
- Investment earnings within super are taxed at a discount of 15% whilst within the accumulation phase.
- Pension income streams are paid to you tax free from Age 60.