Retirement Planning
Written by: Samantha Butcher l Advisory Team
Saving for our retirement should be a primary goal for all of us. The age pension is barely enough to cover basic living expenses so most people rely on a top-up of their own money to be able to continue to afford all the things they would like to do in retirement. We want you to be as prepared as possible for retirement as these are the golden years you have worked so hard towards, introducing; Retirement Planning + Getting The Most Out Of (In To) Super l Canny Group.
Superannuation is designed to provide us with retirement income (or at the very least a top-up to the age pension). The good news is that superannuation is still one of the most tax-effective ways to invest in this country.
Making contributions can reduce our taxable income, investment earnings are taxed concessional or not taxed at all if in the pension phase, and if over age 60, any income drawn from super is tax-free.
As we approach the end of the financial year and start thinking about tax planning, it is a perfect opportunity to re-evaluate your financial goals and consider taking advantage of the various superannuation contribution opportunities available to you.
Your Financial Goals for Contributing to Super
Tax-Deductible (Concessional) Contributions
Anyone under age 67, or those aged between 67 and 75 who meet the ‘work test’, are eligible to claim a tax deduction for contributions to super up to the annual cap of $25,000. This cap includes any superannuation guarantee contributions made by your employer.
Employees can either salary sacrifice, so a portion of their salary goes straight to superannuation pre-tax, or they can choose to make a lump sum payment to super at any time during the financial year. Clients choosing the latter option must notify their fund of their intent to claim a tax deduction for the particular contribution.
Please note, as of July 1 2021, this annual cap is increasing to $27,500!
Carry Forward Concessional Contributions
If your Total Super Balance (TSB) is less than $500,000 at June 30 of the previous financial year, you may be able to take advantage of catch up concessional contributions for the past two financial years and contribute the balance of any unused cap ($25,000 each year currently).
As per the previous example, any concessional contribution made is taxed at 15% (inside your super fund) rather than your marginal tax rate!
You can check your unused concessional cap balance in your MyGov account.
After Tax (Non-Concessional) Contributions
If you have access to a lump sum of cash, you may also consider contributing to super after tax. You will not be able to claim a tax deduction for the contribution, but it will ensure that whenever you (or others) access those funds from super you will not pay any tax on the withdrawal.
At the moment, we can contribute up to $100,000 per year (as long as our Total Super Balance is less than $1,600,000 at June 30 of the previous financial year) into super. This is due to increase to $110,000 as of July 1 this year which will be a real bonus for many of you!
What’s more, most people (there are strict rules on who can do this and when and we suggest seeking advice first) can bring forward the next two years of non-concessional contributions and effectively contribute $300,000 into super at once!
Government Co-Contributions
If you earn below $39,837 per annum and contribute $1,000 or more into super after-tax, the government will make a further contribution of $500 on your behalf. That is free money into your superannuation fund.
If you earn between $39,837 and $54,837, you may be entitled to a partial co-contribution (there are other eligibility criteria including your age and total super balance which need to be met).
Downsizer Contribution
This is one of my favourite schemes the government has introduced in a long time. If you are aged 65 or older and have recently sold your family home which you have owned for ten years or more, you can contribute up to $300,000 of the proceeds into super. And, if you owned the home jointly with your spouse, you can each contribute up to $300,000 into super.
The home must be in Australia and you must make the contribution within 90 days of settlement.
To make this open even more attractive, it does not count towards your non-concessional cap!
Spouse Contribution
If your spouse earns less than $37,000 per annum and you make an after-tax contribution of $3,000 into their super fund, you will benefit from a $540 tax offset! Yet another way to be rewarded by the tax office for helping to boost your overall retirement savings! It’s a win-win!
Low Income Super Tax Offset (LISTO)
If your total income is less than $37,000 you may be eligible for the low-income tax offset of up to $500 for concessional (pre-tax) contributions up to $3,33. These contributions can be made by yourself or your employer.
Help from Canny Advisory + Our Financial Advisory Services
Taking advantage of some of the above suggestions will increase your retirement savings as well as potentially provide some immediate tax relief. In this low-interest rate environment, many clients are looking for alternatives for their money to be working harder for them. Contributing to and investing wisely within superannuation could help.
Now is a great time to speak to your Accountant about tax planning and also your Financial Advisor about other wonderful ways you could be maximising your superannuation.
Please be mindful that all of the possibilities above have particular eligibility criteria and you should seek professional financial advice from your existing Financial Advisory Firm or better yet, a member of Canny Group’s Financial Advisory team before you do anything. There are penalties if you exceed the caps. We can help guide you to ensure you are making the most effective contribution based on your individual circumstances to ensure that you are working towards reaching your financial goals. We have a team of financial advisers who are specialists in Retirement Planning advice as well as Superannuation and also to make sure that you are as prepared as possible for ensuring you are looked after whilst enjoying your retirement.
Some simple steps now could result in a significant increase in your retirement savings, allowing you to do more of what you want to do in your twilight years.
Get in touch today to find out how we can help!
