Year: 2020

As you approach retirement, it could be a good idea to consider giving your super a boost.

If you’re looking at retiring in the near future, your savings will soon turn into an income stream. So the more you’ve saved, the better. Here are some ways you could top up your retirement savings.

1. Make the most of after-tax contributions
Making personal contributions to your super from your after-tax money can be one way to boost your super. These are known as non-concessional contributions and, while there is no tax deduction available, an annual cap of $100,000 applies (i). If you’re under 65, though, depending on your overall super balance, you may be able to bring forward up to two years of this cap, allowing you to contribute a total of $300,000 at a time. For more information check out the ATO website.

If you have super assets of $1.6 million or more as at 30 June of the previous financial year, you can’t make after-tax contributions to your super or you may be penalised.

2. Consider tax-effective contributions like salary sacrifice
If you’re an employee, making voluntary contributions from your before-tax salary to your super (also known as salary sacrifice) could not only help you boost your super but also potentially reduce the amount of tax you pay. That’s because salary sacrificed contributions are taxed at 15% (ii) when received by the fund, which is potentially lower than your personal marginal tax rate (iii). These types of ‘concessional’ contributions are capped at $25,000 per financial year, including ‘superannuation guarantee’ contributions from your employer..

And if you’re self-employed you don’t need to miss out. You can make personal contributions to your super (using your own cash) and claim a personal tax deduction of up to $25,000 as a concessional contribution(iv). This option is also available to employees so they can choose between a salary sacrifice arrangement and personal deductible contributions.

3. Review your investment options
While the contributions you make may have a significant impact on your super balance when you retire, the investment returns generated by your super fund also matter, as well as how long your money was invested. Check whether your super is invested in appropriate options based on your needs and financial circumstances such as age, goals and your level of risk tolerance. If you’re unsure, contact your super fund or a financial adviser for guidance. It’s worth reviewing your investment options regularly.

4. Consider spouse contributions
In some circumstances, you may be eligible for a tax offset if you make an after-tax contribution to your spouse’s super (husband, wife or de facto) and satisfy eligibility criteria. If you make after-tax contributions to your spouse’s super fund, you may be able to claim an 18% tax offset on a contribution of up to $3,000 when completing your tax return at the end of the year (v).

From 1 July 2020, to receive a spouse contribution your spouse must be under the age of 67, or if your spouse is aged 67 to 74 they must meet the requirements of the work test. The work test broadly requires that they are in paid employment (or self-employment) of at least 40 hours within a 30-day period.

To qualify for the full tax offset, which works out to be $540, your spouse’s income must be $37,000 or less. Their income must be less than $40,000 for you to receive a partial tax offset.

5. Look into downsizer contributions
You may be able to top up your super with the proceeds from the sale of your home. If you’re 65 or over, you can make an after-tax contribution into your super account of up to $300,000 from the sale proceeds of your home if you have owned the property for at least 10 years. Couples can contribute $300,000 each, regardless of their work status, super balance or history of contributions.

Contact us if you’d like some assistance making the most of your super in the lead up to retirement.

i https://www.ato.gov.au/individuals/super/in-detail/growing-your-super/super-contributions—too-much-can-mean-extra-tax/?page=3

ii https://www.ato.gov.au/Individuals/Super/Growing-your-super/Adding-to-your-super/Tax-on-contributions/

iii https://www.ato.gov.au/rates/individual-income-tax-rates/#Residents

iv https://www.ato.gov.au/individuals/super/in-detail/growing-your-super/super-contributions—too-much-can-mean-extra-tax/?page=4#Super_for_the_self_employed

v https://www.ato.gov.au/Individuals/Income-and-deductions/Offsets-and-rebates/Super-related-tax-offsets/#taxoffset

©AWM Services Pty Ltd. First published August 2020

A new year’s as good a time as any to make plans. How about a gift to your future self by maximising your retirement contributions?

It’s not as far-fetched or self-absorbed as it might seem.

If you think of this as investing in your future self or your loved ones, it could make good sense. We’re used to spending on education and training, which are also investments in tomorrow. And which really matters more, upgrading to a flashier car today, or buying a jetpack* a few years down the line?

There’s no time like tomorrow

There are a number of ways you can contribute more to your super, to take advantage of time and the magic of compound interest.

These include salary sacrificing, and a range of tax-deductible, spouse and downsizer contributions, as well as government co-contributions.

Things to keep in mind

What you do right now affects how well you can live in future. So, before you decide to gift your future self, think carefully about the right course for you.

If you’re thinking about making extra contributions towards your retirement, make sure you’re across the super contribution rules.

For instance, if you go over the super contribution limits, additional tax and penalties may apply.

Remember that the value of your investment in super can go up and down. Before making extra contributions, make sure you understand and are comfortable with any potential risks.

The government sets general rules about when you can access your super, which means you typically won’t be able to access your super until you retire. If you’re over 65 and making contributions, you generally need to satisfy work test requirements and be under age 75.

Extra contributions may also affect any rainy day savings you set aside for emergencies, so do your homework before you commit to your future self.

The not-so-silly season

Many of the presents we buy for ourselves and loved ones date quickly – that new smartphone isn’t new for long. Increasing retirement contributions may delay gratification but pay dividends down the line.

If you have some years to go before you retire, you may even be able to retire sooner if you increase your contributions now.

If you need assistance in topping up your super to maximise your contributions we can help.

*jetpacks not guaranteed

©AMP Life Limited. First published November 2019

If there’s one thing certain in life it’s change. And generally your attitude towards saving and investing will change as you get older.

How your super is invested when starting your first job may not be the right approach when you’re approaching retirement. Luckily you can change your investment options at any time and this could make a real difference to how much money you have when you retire.

There are usually several different investment options to choose from. If you haven’t selected an investment option, you’re probably invested in your fund’s default option, which will generally take a balanced approach to risk and return.

To get up to speed on your super investment options, we’ve answered three common questions: how your money is invested, the different options available, and how your stage of life may influence your preferences.

What do super funds do with my money?

Typically, no less than 9.5% of your before-tax salary (if you’re eligible) is paid into super, which is then taxed at a maximum of 15%. Your super fund will invest this money over the course of your working life, so you can hopefully retire comfortably.

Your super fund will let you choose from a range of investment options and generally the main difference will be the level of risk you’re willing to take to potentially generate higher returns.

If you’re not sure what you’re invested in, contact your super fund. You may also be able to see your current investment option by logging into your super fund’s online portal – this may also give you a current balance and other information such as your projected super savings over a lifetime.

What are the super investment options I can choose from?

Most super funds let you choose from a range, or mix of investment options and asset classes. These might include ‘growth’, ‘balanced’, ‘conservative’ and ‘cash’ but the terms can differ across super funds. Here’s a small sample of the typical type of investment options available:

• • Growth options aim for higher returns over the long term, however losses can also be notable when markets aren’t performing. They typically invest around 85% in shares or property.

 

• • Balanced options don’t tend to perform as well as growth options over the long term, but the loss is also less when there are market downturns. They typically invest around 70% in shares or property, with the rest in fixed interest and cash.

 

• • Conservative options generally aim to reduce the risk of market volatility and therefore may generate lower returns. They typically invest around 30% in shares and property, with the rest in fixed interest and cash.

 

• Cash options aim to generate stable returns to safeguard the money you’ve accumulated. They typically invest 100% in deposits with Australian deposit-taking institutions, such as banks, building societies and credit unions.

Super funds may have different allocations, so it’s important to read your super fund’s product disclosure statement before making any decisions. It could be a good idea to consider factors such as your current stage in life, and future plans and goals before choosing the super investment option that’s right for you.

What’s the right investment option for me?

Choosing the most suitable investment option generally comes down to your goals for retirement, your attitude to risk and the time you have available to invest.

If you’re young, you may have more time to ride out market highs and lows, and therefore be willing to take on more risk in the hope of achieving higher returns.

If you’re closer to being able to access your super, you may prefer a conservative approach as a share market crash could be harder to recover from than if you’re 20 years away from retirement.

While many people put off thinking about super, being informed and engaged from a young age and throughout your career may make a big difference to the returns generated and your final super balance.

©AMP Life Limited. First published December 2019