Building Your Super
Putting a little towards your super today, could mean a lot for you tomorrow. At a minimum, you have your employer contributions (Superannuation Guarantee Contributions or SG), which your employer is required to pay on your behalf by law. But it's also smart to start thinking about how you could be making some additional voluntary contributions, and other ways to maximise your entitlements.
Maximising your entitlements can be particularly useful ahead of tax time.
Read each section for more information.
In here you’ll find some tips and tricks on how to make the most out of your super.
Most likely, you'll start superannuation when you start working for the first time. This is because if you're an eligible employee, your employer is required by law to pay contributions on your behalf. These contributions are usually referred to as Superannuation Guarantee Contributions (SG).
These contributions are “before tax” and therefore make up part of your Concessional Contribution Cap – so bear this in mind if you’re making additional contributions.
Generally you’ll be considered an eligible employee if you are:
- at least 18 years of age;
- paid $450 (before tax) or more in a calendar month; and
- a full-time, part-time or casual worker.
An SGC is typically 9.5% of salary or your ordinary time earnings, which could include award payments, bonuses, commission and allowances.
Employers are required to pay these contributions on your behalf at least on a quarterly basis.
If you're an existing member, go to the Manage my super section to find out how to get your contributions started.
You have the choice to top up your superannuation account with money out of your own pocket. This is referred to as making a voluntary or personal contribution.
|Personal or Voluntary Contribution|
|There are 3 types of voluntary (personal) contributions:
You can make contributions to super from your gross salary and be taxed at a lower rate of 15% for this contribution.
See Salary Sacrifice section for more information and an example of how this works.
All you need to do is tell your employer how much of your gross salary you’d like to put into your super and how often, and they will arrange this for you alongside your salary payment.
Make sure you stay within the Concessional Contribution Cap – see tip.
|Tax Deductible contribution||
If you're not an employee (i.e. self employed) and get your income from sources other than work as an employee and make a contribution to your super from your personal money and claim a tax deduction at tax time.
This is the same as Salary Sacrificing, but you decide when you make the payment(s) and then claim back the tax benefit when you do your tax return.
Make sure you stay within the Concessional Contribution Cap – see tip.
Tip: Note that your SG (employer contribution) plus any Personal or Voluntary contribution (as explained above) do have a yearly cap of $25,000 (rising to $30,000 from 1st July, 2014). This is called a Concessional Contribution Cap. This means that in order to ensure you’re benefiting from the 15% tax rate, all your contributions need to be less than the cap limit (of $25,000).
Make a contribution to your super from your personal money.
You do this if you have some extra money you’d like to put into your super. There is no additional tax claim you can make for this money, but of course it’s additional money in your super fund. The current maximum you can put into your super this way each year is $150,000 (increasing to $180,000 from 1st July, 2014). People aged under 65 in a financial year can bring forward two years of future entitlements averaged over a three year period, giving them a cap of $450,000 over a three year period.
If you earn less than $48,516 and you make an After-Tax contribution to your super (see After-Tax contribution), the Government will contribute up to 50c for every dollar you put in up to a maximum of $500 (the amount the Government contributes is dependent on your income).
All you need to do is make an After-Tax Contribution and, as long as your super fund holds your Tax File Number (TFN), your Co-Contribution will automatically be paid into your fund.
Another way to boost your balance and potentially save on tax is to contribute an additional part of your salary to your super. This is called salary sacrificing.
Again this will be taxed at a lower rate of 15% and contributes to your Concessional Contribution Cap.
All you need to do is ask your employer to pay some of your gross salary into your super fund. You decide how much.
Super contributions from your employer (SG) are taxed at a maximum rate of 15% (provided you don’t exceed the before tax contribution cap for the year). That means that any Salary Sacrifice contributions you make are deducted from your Taxable Income.
Here’s an example of how this works:
|Amount Salary Sacrificed||-||$10,000|
|Taxable Income[?]<2012/2013 marginal income tax rates applied.||$60,000||$50,000|
|Less Income Tax||$11,550||$8,550|
|Less Medicare Levy[?]<1.5% Medicare levy applied.||$900||$750|
|Gross Super Payment||-||$10,000|
|Tax on Super[?]<15% Superannuation Contribution tax applied.||-||$1,500|
|Net Super Payment||-||$8,500|
|Total Tax Paid
Remember superannuation contributions must remain in a super fund until you meet a condition of release such as reaching preservation age and may be subject to tax at time of exit. The 9.5% employer contribution may be impacted by an individual’s decision to make salary sacrifice contributions. A concessional contribution cap of $25,000 p.a. applies (2013/2014) increasing to $30,000 in 2014/2015. Any salary sacrifice amount over the concessional contributions cap will be taxed at your income tax marginal rate. There is also an Excess Concessional Contributions charge (ECC). For more details refer to the ATO website www.ato.gov.au. The example above is for illustrative purposes only, actual benefits may vary and will depend on individual circumstances.
If you've had more than one job, chances are you'll have more than one superannuation account. One way to eliminate multiple fees and maximise your savings is to rollover any existing super you may have in other accounts into one fund of your choice.
Two ways to eliminate multiple fees and maximise your savings are:
- Rollover: find which funds your superannuation has been contributed to and consider moving all your super money in to one fund of your choice.
- Find your lost super: there is $18.1 Billion lost superannuation in Australia. To find any lost money you may have, either call the ATO on 13 28 65 or use their Superseeker tool online – all you’ll need is your Tax File Number (TFN) and date of birth.
Before you rollover or consolidate your superannuation, you should check to see if insurance or other benefits will be impacted or lost. Some funds may also charge withdrawal or exit fees.
If your spouse is unemployed or earns less than $10,800 p.a., you can help build their retirement savings by contributing to their superannuation.
Spouses can be either married or de-facto and there are possibly tax incentives available to those who are eligible.
With spousal contributions you may be able to claim an 18% tax offset ($540 maximum) on super contributions of up to $3,000 on behalf of your spouse.
You may even be entitled to a tax offset of up to $540 (maximum) each financial year if:
- you do not claim a tax deduction for the contribution;
- at the time the contribution is made, both you and your spouse are Australian residents and live together on a permanent basis;
- the sum of the spouse's assessable income and total reportable fringe benefits amount for the financial year is less than $13,800; and
- the contribution is made to a complying superannuation fund for the income year.
Your personal circumstances will determine whether you could end up paying less tax so check out the Australian Taxation Office (ATO) website for more information.