Friday, August 17, 2012
With the start of a new financial year just past, now is perhaps the perfect time to talk to a financial adviser about strategies to boost your superannuation.
There have been some changes to super rules recently, but with so many tax concessions in place super can still be one of the most effective ways to save for retirement.
The Government wants to encourage us to save gradually rather than making a huge lump sum investment as we approach retirement, however there are limits to how much we can tax-effectively contribute to super each year.
These limits are called contribution caps. Different contribution caps apply depending on the type of super contribution you make and how much you have contributed to your super in the past.
Knowing what the contribution caps are will help you make the most of your super savings and stop you from paying unnecessary tax. If you exceed the limit you could potentially be taxed at penalty rates of up to 78% on top of 15% you have already paid.
One of the best super saving strategies for many people is salary sacrifice. Salary sacrifice can be a tax-effective way to boost retirement savings with contributions to your super made from your pre-tax income. This means the contributions are taxed at just 15%, rather than your marginal tax rate.
If you aren’t able to set up a salary sacrifice arrangement, have no employment income or are self-employed (earning less than 10% of your income from an employer), you may consider making a personal contribution to super this year.
Not only will this boost your retirement savings, but you may also be able count it as a tax deduction, meaning savings at tax time.
Another advantage of super can be the ability to pay insurance premiums from your super, by purchasing insurance through your super fund - under insurance is a major issue in Australia and up to 95 per cent of Australian families do not have adequate levels of insurance cover.**
While most people would never consider driving a car without motor insurance, many of us do not insure our most important asset – our ability to earn an income. There are a range of different types of insurance available that could help provide for you, or your family, in the event of accident, illness or injury.
For example, you may be able to buy adequate life and Total and Permanent Disability insurance cover through your super. The tax savings may be an advantage of this strategy, plus your insurance premium may be cheaper because the super fund may be buying the insurance in bulk at a discounted rate.
The rules around superannuation can be complex and these strategies may not be appropriate for everyone, so it is critically important to consult a financial adviser to get advice that is specific to your circumstances.
Make it a super start to the year - by seeing a financial adviser and putting a strategy in place now, giving you the peace of mind of knowing that you are getting the most out of your super and insurance this financial year.
Call Hugh* from RIadvice-retireInvest on 03 9471 0080 today.
*Hugh Kilpatrick is an Authorised Representative of RI Advice Group Pty Limited (ABN 23 001 774 125), Australian Financial Services Licence 238429. This editorial does not consider your personal circumstances and is general advice only. You must not act on the information provided without first obtaining professional financial advice specific to your circumstances from a suitably trained and authorised professional.** 2010 Lifewise/NATSEM Underinsurance Report conducted for the Financial Services Council.