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Superannuation – Are You Fully Leveraging Your Options to Save?

A compulsory arrangement for placing a minimum percentage of your income into a retirement fund, Superannuation, also known as “super,” is invested in a variety of assets to ensure a comfortable retirement. By placing your pre-tax salary into your super, you can trade an easy sacrifice in the now for a much more difficult sacrifice in your future.

In return for your employer providing benefits to your super, you can make an arrangement with your employer to also forgo a portion of your future salary. Your employer must pay 9.5% of your ordinary time earnings into your super account. This agreement lasts for the period of the arrangement, meaning you have no access to the sacrificed wages during this time.
Your salary sacrifice can also reduce your tax burden. If you make super contributions via a salary sacrifice agreement, your contributions are taxed in the super fund at a maximum rate of 15%, which is generally less than your marginal tax rate.

Starting 1 January 2020, salary sacrificed super contributions will NOT reduce the ordinary time earnings by which your employer calculates your super entitlement, NOR will salary sacrificed super contributions count toward the amount required that your employer makes to avoid the super guarantee charge. Rather than employee contributions, salary sacrificed super contributions are classified as employer super contributions and remember that the concession contribution cap is $25,000 per year.
 
A little goes a long way in retirement
Super Caps

Depending on your age and on the type of contribution you make, you may suffer consequences for making contributions above the super cap. Each year, there is a cap on the amount of money you can contribute to your super. If you go over your super cap, it’s possible you will pay additional taxes. For example, if you pay more than the concessional cap (the pre-tax cap), the amount above the concessional contribution along with interest will be included in your income tax assessment.

In this situation, you have a couple of options: Either you can withdraw some of the excess, up to 85%, to pay your additional tax, OR you can withdraw the excess along with earnings. Then, the earnings will be included in your income tax assessment. If you choose neither of these options and leave the excess in your super, the excess amount will be taxed at the top marginal rate.

Check your contributions on a regular basis to ensure you don’t contribute above your cap. Contributions only count when they are received by the fund rather than when the payment is sent. Check that your fund receives all of your contributions by 30 June.
 
It's your decision to make
Incrementum Wealth Management

If you would like to revisit your Financial Health Check, including assessing your Superannuation, insurance and investment needs, you are invited to meet with a professional adviser from Incrementum Wealth Management. Please feel free to contact us at Support@incWealth.com.au or click the button below for sound advice tailored to your individual needs, goals and objectives.
 
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