RETIREMENT PLANNING STRATEGIES
During your final working years, the general objective should be to get as much into super as possible, due to the concessional tax treatment on investment earnings and tax-free retirement income.
Outlined below are several essential strategies:
Salary Sacrifice
Salary sacrificing involves asking your employer to redirect a portion of your gross salary into your superannuation, rather than receiving it as personal income. These contributions are then taxed at only 15% (30% if you earn more than $250,000) within super, rather than being taxed at your marginal tax rate if taken as wages in hand.
Salary sacrifice contributions count towards the concessional contributions cap of $30,000 p.a.
Personal Concessional Contributions
Personal concessional contributions occur when you deposit a lump sum into your super account and then claim a tax deduction for the amount contributed. Both employees and self-employed individuals can make personal concessional contributions.
Receiving a personal tax deduction for making super contributions will reduce your personal income tax. Even though contributions tax of 15% will be payable (30% if earning more than $250,000 per year), this should be lower than your personal marginal tax rate.
Unused Concessional Contributions
Carry-forward unused concessional contributions allow you to utilise any unused portion of your concessional contribution cap from the previous five years (on a rolling basis), provided your super balance was below $500,000 on the 30th of June just prior to the current financial year.
Non-Concessional Contributions
Non-concessional contributions are after-tax contributions made into super up to a maximum of $120,000 per person, per financial year or up to $360,000 under the bring forward rule, utilising three financial years in one lump sum.
Recontribution Strategy
A recontribution strategy is the process of making withdrawals from your superannuation account and immediately contributing them back into super as a non-concessional contribution, with the intention of converting taxable components to tax-free components. This can reduce or eliminate taxes on death to a non-tax dependant (e.g. an adult child).
Downsizer Contribution
A downsizer contribution is a contribution made into superannuation with proceeds from the sale of your home. You can contribute up to $300,000 per member of a couple as a one-off contribution to super, without counting towards any other contribution caps.
Using one or more of these retirement planning strategies is likely to improve your financial position as you approach retirement, giving you the ability to retire sooner, or with more. Please contact us today to discuss how these strategies can be applied to your personal financial situation.