Many of the super reforms which took effect from 1 July 2017, have made planning for retirement more complicated, especially for Australians close to retirement or in retirement.
Even so, the super rules still present opportunities for Australians to boost their super accounts. Set out below are 5 super strategies to consider during the 2017/2018 year.
- Consider making voluntary concessional contributions
Since 1 July 2017, the annual concessional contributions cap for all individuals is $25,000.
As an employee, you can make additional concessional contributions via a salary sacrifice arrangement with your employer, or by making personal tax-deductible super contributions. If you opt for salary sacrificing, then discuss with your employer the amount of salary you would like to salary sacrifice into super for the year (if you haven’t already), as these instructions need to be documented and in place prior to any salary being sacrificed into your super account.
Important: If you have a pre-existing salary sacrifice arrangement, you may need to review your current arrangements, especially if there has been a change in your personal circumstances or a boost to your salary. Most HR departments require time to set up the necessary paperwork, so ensure you give them enough notice.
If you are fully or partly self-employed or not employed, think about making a concessional contribution as a personal tax-deductible super contribution, as this can be an easy way to cut your tax bill. Many people forget this simple strategy to reduce their personal income tax and boost their retirement savings.
- Ensure you don’t exceed your concessional contributions cap
The annual concessional contributions cap for the 2017/2018 financial year is significantly lower than previous years, which means Australians with pre-existing contributions strategies and other Australians considering making additional concessional contributions, need to be mindful of the lower cap.
Concessional contributions include your employer’s compulsory contributions (SG), any additional employer contributions (if applicable), your salary sacrificed contributions, and any personal tax-deductible contributions. Since 1 July 2017, the annual concessional cap is $25,000, for all individuals.
Before making additional concessional contributions, consider your employer’s SG contributions (which count towards your annual cap), and establish where you are in relation to your annual contributions limit before making any contributions.
Important: Many people forget that any additional contributions into their super account must be made well before 30 June. The key date is when the super contribution is received by the fund, not when you make the payment. Even electronic payments can require several days to be received by a fund.
- Consider non-concessional contributions (if you can)
Making a non-concessional contribution remains a great way to boost retirement savings and enjoy potentially lower tax on investment returns in the superannuation environment.
When you make a super contribution from after-tax dollars, you are making a non-concessional contribution. A lower $100,000 annual non-concessional contributions cap applies from 1 July 2017. However depending on your age and total superannuation balance, you might be able to make non-concessional contributions which exceed the annual cap in a year, by bringing forward your cap for future years.
- Check out the co-contribution giveaway
If you are a low or middle-income earner, consider making a non-concessional contribution of up to $1,000 to qualify for the government’s co-contribution (up to $500 for the 2017/2018 financial year) into your super account.
This tax-free giveaway is available to eligible individuals who make a non-concessional (after-tax) contribution and who earn a total income of less than $51,813 a year (for the 2017/2018 financial year).
- Boost your spouse’s retirement savings
You may receive some small but handy tax benefits by helping your spouse build retirement savings. A possible strategy to consider is making a spouse contribution of up to $3,000 into your spouse’s super account to qualify for a tax offset of 18% (up to $540) if your spouse earns $37,000 or less (or a reduced tax offset if your spouse earns between $37,000 and $40,000).
For some couples it can also be worth splitting their super contributions. This strategy is only available with some super funds, but it can help equalise two super accounts. If you qualify, and you made eligible super contributions during the 2016/2017 year, then the splitting request generally needs to be submitted to your fund by 30 June 2018 stating you intend to split the contributions made in the previous tax year (2016/2017 year).
Alternatively, if you plan to split contributions made during the 2017/2018 year, then the splitting request generally needs to be made by 30 June 2019. However a contributions splitting request may need to be submitted in the tax year in which you made eligible super contributions, if you roll over or withdraw your entire benefits, in that year.
Important: If you plan to claim a tax deduction for super contributions, then the notice to claim a deduction must be lodged BEFORE the super splitting declaration.