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.
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