While the rules and legislation associated with superannuation may change from time to time as evidenced in the recently announced 2016 budget, it is still among the most effective retirement strategies, and for many Australians superannuation is their main form of retirement income.
The current average superannuation balance at the time of retirement in Australia is $292,500 for men and $138,150 for women (2013/14).1
The good news is that these average balances are increasing, however the ASFA Retirement Standard recommends that $545,000 in superannuation is required for a single person to live a comfortable lifestyle2 in retirement.
Building your superannuation balance is most effective when you invest regularly and there are many additional strategies which can help boost your retirement savings.
If you want to grow your superannuation, the most important thing you can do is seek professional financial advice. We can help you understand your complete financial situation and appetite for risk, as different superannuation investment strategies may be more appropriate at different stages of your life and for your investment style.
For example, a growth strategy may be more appropriate for long-term investors, such as young professionals, when retirement is more than 30 years away, whereas a balanced or conservative strategy may better suit pre-retirees or those who prefer lower risk and who wish to access their super within the next 5 years.
Superannuation is one of the most tax-effective schemes available, with contributions and earnings generally taxed at just 15%, and salary sacrifice arrangements are another way you can save tax and increase your savings.
You can make concessional contributions of up to $30,000 (including your employer’s 9.5% contribution) from your pre-tax salary or up to $35,000 if you are over 50. Changes to superannuation announced in the 2016 Budget mean that from 1 July 2017, the amount you can pay in concessional contributions will reduce to $25,000 for everyone. If you exceed these caps penalties apply. All contributions to super are preserved until you meet a condition of release. Your salary sacrifice contributions are taxed at 15% as opposed to much higher marginal tax rates when you are earning more than $37,000 per year. Income earners with an income of over $250,000 will also be faced with a 30% tax rate for contributions to super.
If you are self-employed you can also claim a tax deduction on your superannuation contributions. As with salary sacrificing arrangements, you are able to contribute up to $30,000 or $35,000 if you are over 50, with your contributions taxed at 15%. Again changes announced in the budget will also apply with maximum concessional contributions reducing to $25,000 from 1 July 2017.
Making additional regular non-concessional contributions to your super from your after-tax income can also increase your savings dramatically. Changes announced in the budget include lifetime caps of $500,000 for additional non-concessional super contributions. This cap of $500,000 includes all non-concessional contributions since 1 July 2007.
There are also other contributions which may apply for low income earners who are making after-tax contributions.
Self-managed Super Funds, or SMSFs, can also be an effective vehicle for increasing your returns. They can be an appropriate choice for those who wish to invest in property and manage their own investment choices, however there are many responsibilities associated with SMSFs so it is imperative to seek professional advice to understand if a SMSF is right for you.
Planning now and making the most of your superannuation savings can help you prepare for the retirement of your dreams. With changes to superannuation announced in the recent budget, it is even more important to seek professional advice. Find out more about how you can super-size your savings for your retirement. Contact us today on 07 3720 1299 or email admin@wealthfundamentals.com.au
[1] https://www.superannuation.asn.au/media-release-8-december-2015
[2] https://www.superannuation.asn.au/media-release-8-december-2015
Lane Moses Pty Ltd ABN 56 092 186 117 trading as Wealth Fundamentals and its advisers are Authorised Representatives of Fortnum Private Wealth Ltd ABN 54 139 889 535
AFSL 357306.
The information (including taxation) contained within this document does not consider your personal circumstances and is of a general nature only - unless otherwise stated. Wealth Fundamentals strongly suggests that you should not act on it without first obtaining professional advice specific to your circumstances.
This publication cannot be reproduced in any form without the express written consent of the author.